Bankruptcy and Mechanic's Liens

Call a Savannah GA bankruptcy lawyer to discuss how a mechanic's lien may impact your bankruptcy rights.

A mechanic’s lien comes into existence on real estate when work done at property or site is not paid for. Under the circumstances if real estate owner files for bankruptcy, resolution of the mechanic’ lien on property would require special procedure. The contractors, suppliers, sub contractors and other professionals involved in project are afforded certain rights by the law which would help in collecting debt owed for their work and this is the mechanic’s lien. Without such a provision there is the possibility if claimants losing their money in the event if property owner liquidating concerned property or filing for bankruptcy.

Mechanic’s liens are the best method to secure debt owed to a business or an individual fro services or products provided in association with real estate. The mechanic’s lien gives the lien holder priority over other creditors since it is now a secured debt. Vendors, worker or supplier with a mechanic’s lien are prioritized above other creditors of real estate except for mortgage lender. Thus a creditor placing mechanic’s lien has a far more possibility of getting compensated in a bankruptcy when compared to other unsecured creditors in the bankruptcy case.

Ideally, a mechanic’s lien would allow creditor to be paid his debt after paying off the mortgage loans with money recovered on sale of real estate in the course of bankruptcy proceedings.

Qualifications to hold a Mechanic’s Lien

In order to be able to file a mechanic’s lien and collect debt on the basis of lien laws there are certain eligibilities that prospective claimant must possess. These are:

• Provide labor, materials and perform services.
• Provided labor, material, services must have been used in project.
• Owner or representative must have authorized services and materials.

In most states a preliminary twenty day notice on non payment has to be served a stop notice prior to qualifying for a mechanic’s lien. Sometimes filing of a mechanic’s lien forces slow paying customers to begin their payments. If even after a twenty day period, property owner does not pay, the claimant can pursue and file a mechanic’s lien. On filing the lien he becomes a lien holder on title of concerned real estate.

A creditor holding a mechanic’s lien is provided secured interest in both chapters 7, which involves liquidation of assets for discharge of debts and chapter 13 bankruptcies, which involves repayment of debts through a court supervised repayment plan over a period of three to five years. In order to assert and pursue a mechanic’s lien in bankruptcy, it is vital to have expert professional advice from an experienced bankruptcy attorney.

Contact a Savannah bankruptcy attorney if you need debt relief assistance or want to file bankruptcy.