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Filing a lien in bankruptcy

Hello, We performed work in Pennsylvania (Philadelphia to be precise) and we have approximately $20k oustanding for some professional engineering design and construction administration services. The work was performed throughout 2018 and 2019. Would filing a lien against the property help us in collecting the outstanding receivables? What are the requirements of timing to file the proper lien. Thank you

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Aug 14, 2019

When a customer or an owner has filed bankruptcy, filing a mechanics lien can be a great tool for recovery. Mechanics liens stack up well in the face of bankruptcy compared to other recovery options. Let's also break this up into a few distinct ideas: (1) mechanics liens and bankruptcy, (2) what constitutes lienable work, and (3) Pennsylvania's mechanics lien deadlines, (4) Notice of Intent to Lien requirements, and (5) other options for recovery. Mechanics liens and bankruptcy Before diving in too far, Levelset has a great article regarding bankruptcy and construction payment here: How to Protect Your Payments When Dealing with a Construction Bankruptcy. As discussed in that article, exactly how a bankruptcy will affect the filing of a mechanics lien will depend on who's gone bankrupt. If the customer has gone bankrupt, but if the property owner has not, the ability to file a mechanics lien will generally be unaffected by the customer's bankruptcy. This is because a mechanics lien ties to the project property, not to any specific individual - including a customer. When the owner files for bankruptcy - not all hope is lost, but recovery will could take some additional effort, and whether or not a lien claim will be available will often come down to the timing of the bankruptcy. Lienable work Note that design professional work (such as engineering) will only be lienable in Pennsylvania when the claimant has contracted directly with the property owner and has done some level of supervising the work of improvement. Otherwise, architects or engineers who contract with a contractor or subcontractor will generally not be entitled to file a valid and enforceable mechanics lien. Lien deadline Pennsylvania has a very relaced deadline to enforce a filed lien, but the deadline to file a Pennsylvania mechanics lien is only 6 months from the completion of the claiamant's work on that particular project. So, for any project where the work ceased more than 6 months ago, a mechanics lien could likely not be filed. Notice of Intent to Lien When hired by someone other than the property owner, when a lien is available, a claimant must first send a Notice of Intent to Lien in order to later file a mechanics lien. When required, a Pennsylvania Notice of Intent to Lien must be received by the property owner at least 30 days prior to filing a mechanics lien. Note, though, that a Notice of Intent to Lien can be effective to compel payment, regardless of what's requied. More on that here: What Is a Notice of Intent to Lien and Should You Send One? For more information on Pennsylvania mechanics liens, these resources should be valuable: (1) How to File a Pennsylvania Mechanics Lien – Step by Step Guide; and (2) Pennsylvania Mechanics Lien Guide and FAQs. Other options Finally, keep in mind that even when a mechanics lien can't be filed, there are always other options for recovery. Whether that be threatening or actually pursuing legal claims, going to small claims court, or sending a debt to collections - there are always other methods for recovery that might work when a mechanics lien might not be the best option available.

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