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Can the contractor bond company settle on a lower amount if you don't have enough money to pay it back in full?

Anonymous Contractor

Not my situation but asking for someone else. They are a contractor company and had a claim filed against their bond for $12,000. The company has also since gone under so there is no incoming cash flow. They haven't been able to pay back their bond company and is now getting sued for over $14K. Is there any way the bond company would be willing to settle for a lower amount if $8K is all they are able to scrape up so far and provide?

1 reply

Matt Viator

Construction Lawyer

Levelset Admin at Levelset

| 992 reviews

Jun 7, 2019

That's a tough situation, and it can be hard to know what to expect when dealing with surety companies. On one hand, insurance companies are rarely afraid to enter into a legal battle, when necessary, to recover their investments. But, on the other hand, they also are generally good about cutting their losses before putting bad money after good. So, it's entirely possible that a surety would be willing to settle for some amount less than what is owed to them. But, it also wouldn't be all that surprising for a surety were unwilling to negotiate and decided to proceed with a lawsuit instead.

For a little more insight, it might be helpful to reach out to a local construction attorney who's got experience dealing with surety companies. While they might not know for sure, they could have some insight into how sureties tend to think about disputes like the one you described above.

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