How To Avoid Construction Lien Traps In Bankruptcy Filings

By Blake Robinson (June 24, 2022, 4:29 PM EDT) -- Most contractors are well aware of the importance of timely filing a construction lien. They also generally understand that they must file a lawsuit foreclosing the construction lien within the timeframe allowed by state law.

Failure to comply with either step in the lien process will invalidate the lien, leaving the contractor as an unsecured creditor.

But what happens when the building owner files a Chapter 11 petition for bankruptcy relief after the contract records a lien but before the contractor is able to file the lien foreclosure lawsuit?

In In re: 450 S. Western Ave. LLC in December 2021, the...

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