Home>Levelset Community>Legal Help>How does a Chapter 11 filing affect service work performed prior to the filing? How does this impact lien rights, warranties, and guarantees on jobs where we wont be receiving payment?
How does a Chapter 11 filing affect service work performed prior to the filing? How does this impact lien rights, warranties, and guarantees on jobs where we wont be receiving payment?
In a very, very quick nutshell: Mechanics liens are generally one of the best ways to secure payment even in the face of a bankruptcy filing. Since most mechanics liens arise/attach at the start of the project, the bankruptcy codes allow them to be perfected even after the bankruptcy has been filed and during the automatic stay. Further, if a lien is so perfected the bankruptcy code allows for the period in which the lien must be enforced to be tolled (suspended) for the duration of the automatic stay, provided a certain notice is filed. Finally, mechanics liens cannot be stripped by the bankruptcy. Note, however, that preliminary notice and lien filing deadlines still apply, however.