You answered the question about which sate to file in, but we now have been told the company is in chapter 11. Should we proceed with the lien?
Feb 20, 2018
The intersection of bankruptcy and mechanics lien law is complicated. The general rule is that, provided the required preliminary notices have been given and the lien would be filed timely, mechanics liens are still able to be filed despite the "automatic stay" that accompanies a bankruptcy filing.
An exception to the automatic stay allows a mechanics lien claimant to perfect (file) a lien after bankruptcy has been filed, and during the automatic stay, provided that the lien arose prior to the filing of the bankruptcy petition. In most states a lien generally arises when the materials are delivered or the work was performed (or at the start of the project itself), so the requirement is met. Note, however, that this exception doesn't apply to the enforcement of the lien - that action may not be initiated during the stay.
That's a really good question - mechanics liens and bankruptcy have an interesting relationship. If the property owner on a project has filed bankruptcy, the ability to file a mechanics lien is typically still present, even after the automatic stay has been instituted. It's sort of an abstract idea, but in Washington, along with most other states, a lien actually "arises" when materials are delivered or work was performed - not simply when the lien is perfected by filing the lien. 546(b) of the bankruptcy code allows the perfection, or continuation of perfection, of a mechanics lien after the bankruptcy petition has been filed if the lien "arose" prior to the filing of the bankruptcy petition. So, generally, a mechanics lien may be filed even after the automatic stay has been instituted. However, a bankruptcy filing will affect the ability to enforce a mechanics lien. A mechanics lien enforcement is not exempt from the automatic stay - so an action to enforce the lien may not be brought while the automatic stay is in effect. However, this is one of the very few situations where the time to file a mechanics lien may be "extended." While lien enforcement deadlines are strictly construed, a lien holder may file notice with the Bankruptcy Court and serve the notice to the debtor's bankruptcy trustee (or debtor in possession) prior to the deadline for enforcing the lien. If this notice is correctly filed, it tolls the foreclosure deadline until at least 30 days after the automatic stay is lifted. The requirements for that notice may be found in These notice requirements are found in Bankruptcy Code Section 546(b)(2) of the Bankruptcy Code and 11 U.S.C. Sec. 108(c). When a property owner has filed bankruptcy, it might be worth reaching out to a bankruptcy attorney for advice on how to navigate the automatic stay - the requirements can get tricky.