Someone told me to look into MI builders trust fund. How do I go about applying?

I believe the person you spoke with was referring to the Michigan Builder's Trust Fund Act (MBTFA), which is a criminal statute, not a fund that you can apply to for compensation. 

On its face, the MBTFA makes it a crime for contractors and subcontractors engaged in the building construction business, to use (appropriate) contract proceeds, with intent to defraud, for their own use before paying their laborers, subcontractors, and materialmen (suppliers). The statute creates a trust fund; it provides that upon receipt of payment from the owner, a trust is created for the benefit of contractors, laborers, subcontractors, and suppliers, and makes the contractor or subcontractor who receives the funds a trustee.

Among the reported legal decisions, the most common set of circumstances leading to criminal prosecution is the misappropriation of funds by a residential builder, which leaves subcontractors and suppliers unpaid, and homeowner's property subject to construction liens. 

But the MBTFA also provides a remedy in civil court.  

Since 1966, Michigan courts have construed the statute to provide a common-law cause of action for unpaid subcontractors and suppliers. This means you can sue someone for money damages, including the officers of the company that misappropriated the money.

Personal liability may be imposed upon corporate officers, or members of a limited liability company, who participate in the receipt and disbursement of construction proceeds, which are then (mis) appropriated in violation of the MBTFA. In this regard, the MBTFA is a legal vehicle to "pierce the corporate veil." But unlike traditional "piercing" claims, which must overcome the strong presumption of limited liability to reach individual shareholders, the MBTFA makes it easier to reach responsible corporate officers. This is because the MBTFA involves the creation of a trust, which increases the level of responsibility for those handling trust funds.

And because of the trust fund element of an MBTFA claim, claims for violation of the statute can survive a discharge in bankruptcy. That's because there are fiduciary duties that come with holding trust funds. Misappropriating trust funds is frowned upon and there is a specific exclusion from discharge under the Bankruptcy Code. This makes an MBTFA claim a very potent collection tool for claimants.

For more information about the MBTFA, I've written several articles on the subject, which are available at the Michigan Construction Law Update blog .