How do I get a joint check cashed when one party is in bankruptcy?

4 months ago

This is happening related to a FL job. We are a party on a joint check because of a joint check agreement with the general contractor. However, the other party to the joint check agreement is now in bankruptcy. We have a joint check with our name on it, and the bankrupt party’s name on, and it’s impossible to get the bankrupt party to reply, and everything with the trustee seems to be frozen. What can we do?

Senior Legal Associate Levelset

Joint checks can be helpful, but in situations where both parties to the joint check agreement can’t or won’t cooperate, they can be a bit problematic. This is especially true where a bankruptcy situation is involved.

This is especially true when joint checks are involved. In fact, Levelset has published an article about joint checks and bankruptcy, which you can find here: Joint Check Agreements And Bankruptcies. As discussed in that article, there are some variables to take into account.

One important variable will probably be exactly what role the bankrupt party has on the project. If they’re your sub or vendor, it may be easier to facilitate payment with the understanding that the requisite payment would eventually be made to the bankrupt party. But, when a customer goes bankrupt, it will be harder to get ahold of payment.

In either case, in terms of being paid based on a joint check that’s already been cut but cannot be cashed, it’d probably be a good first step to discuss the matter with the contractor who cut the check. They may be willing to make payment directly rather than relying on joint checks.

When the contractor making payment is your customer, it might be easier to convince them to cut separate checks for you and the bankrupt party. This is particularly true where the use of joint checks wasn’t actually required (but was instead allowed).

When a customer has gone bankrupt, it’s typically a lot harder to get paid. Obtaining full payment from that customer will often be impossible, and partial payment could take quite some time. When that happens, looking to the owner or general contractor for payment would likely be more fruitful. For one, the contractor may be able to avoid paying the joint check in full and could potentially make partial payment to the non-bankrupt party (particularly under a required joint check agreement). Further, even if they refuse to make payment, threatening a lien or legal action could be helpful to get the wheels turning on payment talks. And, if necessary, a claimant could potentially file a lien or take legal action against the contractor or owner (such as unjust enrichment, potentially) to obtain payment.

For more information on Florida’s mechanics lien requirements and how to file a Florida lien, here are two great resources: (1) Florida Mechanics Lien Guide and FAQs; and How to File A Florida Mechanics Lien – Step By Step Guide To Get You Paid.

I hope this was helpful! Ultimately, for the most clarity, it’d be wise to consult a local attorney familiar with both construction and bankruptcy – they’ll be able to review the specifics of your circumstances and advise on how best to proceed in your situation.

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