I was not paid and the subcontractor now placed me on their chapter 7 - what should i do
Mar 27, 2018
North Carolina gives broad recovery rights, but making a claim can be tricky for subcontractors. A sub-subcontractor may file a "lien" under two scenarios: (1) when that sub has provided the requirements for a Claim of Lien Against Funds; and (2) through the Subrogation of the general contractor's lien when the owner still owes money to the general contractor.
For a Claim of Lien Against Funds, this claim is actually sent up the chain rather than filed - and it doesn't actually affect the property title. If this Claim is sent, though, payments that may be owed to the nonpaying party will be frozen. If the relevant payment is not frozen - and that payment is made anyway - then the claimant who sent a Claim of Lien Against Funds may then file a lien through subrogation against the property (which actually affects the property title).
A lien through subrogation - or a subcontractor's Claim of Lien Against Real Property - is a little different than the Claim of Lien Against Funds. With this type of lien, the lien claimant must: (1) have served a Notice of Claim of Lien Upon Funds to the property owner; and (2) the general contractor must be owed money from the owner. If both apply, the subrogation lien must be filed within 120 days from when the general contractor last furnished labor and/or materials to the project. This acts as a more traditional mechanics lien - one that attaches to the project property. Regarding how a bankruptcy filing might affect a claim - bankruptcy scenarios can get complicated quickly with mechanics liens. However, as a general note, mechanics liens tend to fare comparatively well when bankruptcy is in play - we take a deeper look at that concept in this article: The Indispensable Guide to Mechanics Liens In Bankruptcy. Of course, any potential recovery may be affected by a state's mechanics lien laws (as we discuss here), so consulting a local North Carolina attorney familiar with bankruptcy law might be the best way to get some clarity in this situation.