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Filing liens after bankruptcy

We have a large national restaurant chain customer with about $28,000 in unpaid invoices for work on many different facilities in about 15 different states. This customer filed CH 11 last week. Are we able to file liens for past due invoices on property owned by a third party landlord or will that be construed as an action to collect a debt and therefore not allowed due to the Chapter 11 filing. We're assuming we will get little to nothing through the bankruptcy process for invoices submitted before the filing.

1 reply

Mar 18, 2020

Mechanics liens fare pretty well in bankruptcy. If the property owner isn't the one going bankrupt, then mechanics lien claims against the project property won't be blocked. The automatic stay block creditors from going after the bankrupt party, but it doesn't block valid claims against related third parties - like a mechanics lien against the project property. With that being said, there's a limit to mechanics liens when work is being done for a tenant. Generally speaking, mechanics lien rights will only be available against the landlord's property when the lease either explicitly requires or approves the construction that's being done. And, if the owner doesn't have some active hand in the project, then their underlying property will often not be lienable. Levelset discusses that here: What Happens to Mechanics Lien Rights If My Project is a Tenant Improvement? So, while a customer's bankruptcy usually won't block a lien claim against someone else's property, if that customer was a tenant, lien rights could still be limited. Potentially, lien rights might be available against the customer's leases - and mechanics liens can often be filed against a bankrupt party even after the automatic stay if the debt was incurred before the bankruptcy. More on liens and bankruptcy here: How to Protect Your Payments When Dealing with a Construction Bankruptcy. Before deciding to pursue a mechanics lien claim against the owner's property, it'd be wise to consult a construction attorney who can review the relevant documentation - like the contracts, the leases (if available), and any other documentation exchanged - to ensure that's a good option for recovering payment. Or, they may have another idea about how to get paid.

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