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When do we have to act on the lien we placed?

ColoradoBankruptcyLien DeadlinesMechanics Lien

The company we filed the lien against has filed bankruptcy and we are filing a proof of claim in the bankruptcy court. I think there is a time limit to act on the lien filed....? Do you act on the lien or can you place some type of holding period while waiting to see if we get paid through bankruptcy proceeds?

1 reply

Oct 16, 2019
Before getting too far along, it's worth mentioning that mechanics liens aren't filed against individuals or businesses, themselves. And, when hired by someone other than the property owner, a customer going bankrupt shouldn't have a huge effect on the ability to recover via a lien claim since the lien is against the project property. Though, when hired by the property owner directly, a lien against that owner's property will be affected by that owner's filing for bankruptcy. Assuming it's the owner who's gone bankrupt: You're right that there's a little more that goes into enforcing the filed mechanics lien. Enforcing a mechanics lien after the owner has gone bankrupt Mechanics liens have strict enforcement deadlines, and once an owner has gone bankrupt, the  automatic stay generally prevents the ability to file suit to enforce the lien claim. Luckily, the Bankruptcy Code has accounted for this possibility. A mechanics lien claimant will generally be entitled to file a preservation notice with the bankruptcy court, which will extend the timeframe for enforcing a lien and prevent the loss of the ability to enforce a filed lien due to an owner's bankruptcy. Alternatively, a claimant may be able to petition the bankruptcy court for relief from the automatic stay. But, in either event, a claimant will need to consult with a bankruptcy attorney. That attorney will be able to better assess the circumstances and navigate the bankruptcy court during the automatic stay. Ultimate guide to mechanics liens and bankruptcy For more background on how mechanics liens fare during a bankruptcy situation, this article is an excellent resource: How to Protect Your Payments When Dealing with a Construction Bankruptcy.
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