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How can I have the mechanic's lien removed from my home through bankruptcy?

I had a house fire in 2016 - almost totalled. Hired a contractor to render the repairs (~$260K). After the time frame for the contract expired, repairs were still under 50% complete. Repairs were sub-quality including actual construction and materials. Disputed poor workmanship with contractor and they abandoned the project (ripping their builders box from the tree). Shortly afterward, they implemented a $50,000 mechanic's lien on the house and initiated a suit for $34,000. We hired an attorney and counter-sued. After depositions, meetings with our attorney, etc., we have piled up $22,000 in attorney's fees and haven't even gone to court. We can't pay the fees and our attorney stated they are filing to withdraw as our attorneys this Wednesday. I am meeting with a Bankruptcy attorney on Friday. My question is: Will a bankruptcy remove the mechanic's lien from my house and dismiss the law suit and the $22,000 attorney's fees? Thank you so much Chris Johnson

1 reply

Feb 19, 2020

First, I'm sorry to hear about your situation, it sounds like you are having a rough time at the moment.

Mechanics Liens and Bankruptcy

Bankruptcy and mechanics liens intersect in complicated ways, but mechanics liens have a strong position even in the face of a bankruptcy filing. While an individual’s personal liability for debts may be stripped by a bankruptcy filing, a mechanics lien is an obligation of the property itself, and is generally not discharged by the bankruptcy. When a mechanics lien has been filed and the property owner files for bankruptcy protection, it is generally the case that the lien will remain on the property, and the enforcement deadline can be tolled through the bankruptcy proceeding. Then after the bankruptcy proceeding is concluded, the tolling stops and the contractor could enforce the lien through a foreclosure action. Note, however, that this requires some specific action by the lien holder. While the Bankruptcy Code does provide a mechanism for preserving the lien claimant’s rights, the claimant must file a lien preservation notice with the bankruptcy court to notice his intention to preserve and enforce his lien rights. This notice shows that the lien holder intends to enforce his mechanics lien against the real property that is subject to the lien. It must be filed with the Bankruptcy Court and served on the debtor’s bankruptcy trustee (in a Chapter 7 case), or on the debtor in possession (in a Chapter 11 case), prior to the deadline for commencing an action to enforce the lien rights in that state. If correctly filed, the notice tolls the foreclosure deadline until at least 30 days after the automatic stay is lifted.

Mechanics Lien Enforcement Deadline in Georgia

Georgia requires that an action to enforce a mechanics lien must be initiated within 1 year from the date on which the lien was filed. After that deadline passes, the lien expires and becomes unenforceable. While it would be very, very odd for a lien claimant to initiate a suit against a homeowner against whose property s/he has claimed a lien without including the enforcement of the lien in the action, it is unclear whether that occurred here. If an action to recover money due was made entirely separate from the lien claim and its enforcement, the lien will expire 1 year after its filing.

Other Debts and Bankruptcy

Personal unsecured debts are generally discharged through bankruptcy. This means that most attorneys fees incurred before a bankruptcy filing will be discharged if they are unsecured. Some fee provisions allow for an attorney to claim a lien against property when fees are not paid. If such a lien is filed, the debt for the attorneys' fees will be secured and the claim against the property can survive like a mechanics lien. There are also some other types of attorneys' fees that survive bankruptcy, but these are for the bankruptcy attorneys' fees, attorneys' fees for child support, or attorneys' fees associated with defenses against certain actions.

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