We signed with a company to perform some work on our house. The work was completed by a sub-contractor. The original company has now filed for Chapter 7 bankruptcy and the sub-contractor wants us to pay him directly. What should we do?
1 reply
May 4, 2020
There's no single way to deal with subcontractor payments when the GC goes bankrupt. But, keep in mind that Colorado is generally considered a "full price" lien state. Meaning, subcontractors are generally entitled to file a mechanics lien for the full value of what they're owed, even if the owner has paid their GC and it would result in the owner paying twice. So, a subcontractor can create a lot of headaches for an owner if the sub proceeds to file a mechanics lien or pursues legal claims.
There are a ton of variables that would come into play when determining whether or not to go ahead and pay a sub directly when their GC has gone bankrupt. So, I'm not sure I'll be able to provide you a cut and dry answer. But, I will say that it's important to weigh the pros, cons, and potential costs of each option. And, if directly paying a subcontractor what they're owed would help to avoid a more serious legal dispute, that might be worthwhile. At the same time, it makes sense to be cautious if you've already paid those project funds to a GC who took off or went defunct with the project funds.
For a little more detail, it might be helpful to consult with a Colorado construction attorney on the matter. If you provide them with more details on the situation, they'll be able to advise you on potential next steps and help to avoid pitfalls.