Navigating the Complexities of Mechanic’s Liens and Bankruptcy: A Guide by Cherney Law Firm, LLC

Understanding Mechanic’s Liens and Bankruptcy: Navigating the Financial Implications


Navigating the Financial ImplicationsWhat is a mechanic’s lien? What happens to it when you file bankruptcy? Understanding the answers to these questions can help you determine a path forward on your journey to financial freedom and help your bankruptcy attorney craft a plan to help you achieve your goals. 

A mechanic’s lien gives contractors, subcontractors, and others in the construction industry a legal claim to ensure payment for their work on a construction project. It can also be a powerful collection tool, allowing lien claimants to file a foreclosure lawsuit to enforce their claim. If a property owner files bankruptcy, a mechanic’s lien will not simply vanish. Instead, if the lien has been “perfected” and is a secured claim, the lien holder can enforce it in bankruptcy court. 

At Cherney Law Firm, LLC, we understand the complexities of bankruptcy law and mechanic’s liens. We can guide you through the process, ensuring that your rights as a property owner are upheld and the complexities are made clear. Owning property comes with challenges, especially when facing financial distress, but being well-informed can empower you during the bankruptcy process. 

If you have a recorded mechanic’s lien on your property and are considering bankruptcy, contact a bankruptcy attorney in Marietta, GA, to help you understand your options and craft a path forward.


What Is a Mechanic’s Liens?


Mechanic’s liens serve as a safeguard for builders, contractors, subcontractors, and material suppliers. It allows them to pursue payment for their services by enforcing a lien against real property. A lien holder can enforce a mechanic’s lien by filing a foreclosure lawsuit. 

In order to enforce a mechanic’s lien, the claimant must perfect the lien. This means filing all notices and documents required by the law within a specified time frame. By perfecting the lien, the mechanic’s lien is now a secured debt and cannot be discharged in bankruptcy.

If you own real property subject to a mechanic’s lien and are considering bankruptcy, an experienced bankruptcy attorney can help you understand your obligations and how bankruptcy can help your situation.


The Intersection of Mechanic’s Liens and Bankruptcy


The Intersection of Mechanic's Liens and BankruptcyWhen you are struggling with debt, you may consider bankruptcy. If you have a mechanic’s lien on your property, it is essential to understand how bankruptcy can help you save your property and ease financial burdens.

Bankruptcy introduces an automatic stay, halting all collection activities, including actions to enforce mechanic’s liens against real estate. However, the actual impact on a mechanic’s lien depends on the lien’s priority and the type of bankruptcy proceeding. Homeowners should understand that bankruptcy does not automatically remove secured debts tied to their real estate.


Chapter 7 Bankruptcy and Mechanic’s Liens

Chapter 7 bankruptcy, often called liquidation bankruptcy, is available to individuals who meet specific income requirements. Filing under Chapter 7 may lead to liquidating your assets to satisfy secured debts. Unsecured debt will be discharged. If the mechanic’s liens have been perfected, it could lead to a forced sale or foreclosure of the bankruptcy estate.


Chapter 13 Bankruptcy and Mechanic’s Liens

Chapter 13 bankruptcy, also known as the wage earner’s plan, is available to individuals who have a regular income. A Chapter 13 bankruptcy filing allows for restructuring debts and creating a modified payment plan. Therefore, you can keep your property and repay the mechanic’s lien through a court-approved repayment plan, offering a path forward for homeowners and lienholders.


Legal Rights and Protections


Mechanic’s liens are used to ensure payment to contractors, subcontractors, and suppliers for work completed on a construction project, but what happens to these liens during bankruptcy? An automatic stay is applied in bankruptcy, temporarily halting creditors’ ability to collect debts. It also pauses a foreclosure suit. 

However, mechanic’s lien claimants may hold special rights allowing lien perfection even after a bankruptcy is filed. Bankruptcy Code Section 362(b)(3) permits the completion of the lien perfection process if the lien arose before the bankruptcy filing. This can be critical, as a perfected lien is a secured claim that can survive the bankruptcy process.


How Cherney Law Firm, LLC Can Help


How Cherney Law Firm, LLC Can HelpIf you’re facing bankruptcy, having mechanics’ liens on your real property can create uncertainty. At Cherney Law Firm, LLC, our bankruptcy lawyer understands the intricacies of bankruptcy law and the significant impact these liens can have. 

We can help you through these uncertain times by offering:

  • Legal Counsel: Our firm holds extensive experience in bankruptcy law. We guide you through how bankruptcy affects your mechanics’ liens.
  • Negotiations: We are prepared to enter negotiations with creditors to protect your rights and assets.
  • Filing Bankruptcy: We can help you with your bankruptcy case, guiding you through the entire process.
  • Representation: We will represent your interests, advocating for you in bankruptcy court and meetings with creditors.
  • Strategic Planning: Every case is unique. We craft personalized legal strategies that consider your interests and goals.


Filing Bankruptcy? Contact Cherney Law Firm, LLC


Understanding how mechanic’s liens will affect your bankruptcy proceeding is critical. Having experienced and knowledgeable legal counsel on your side can help you understand your situation and create a plan for the future. 

At Cherney Law Firm, LLC, we can guide you through the legal process and explain your options. We can create a plan that meets your financial goals by critically analyzing your financial situation and reviewing your unsecured and secured debt. Every bankruptcy case is unique, and the complexities of lien rights interwoven with federal bankruptcy law necessitate knowledgeable insights. Our team understands how difficult this situation can be, and we are ready to support you through this process.

Cherney Law Firm, LLC is your trusted bankruptcy lawyer. If you are struggling with unpaid construction debts, contact us to schedule a consultation. We can evaluate your situation and help you navigate the following steps on your journey to financial freedom. 

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