Bankruptcy of Owner or Other Party to the Contract
If mechanic’s lien rights arise in favor of a claimant because of labor or materials furnished to a project, a notice of lien may still be filed after the owner of the property has filed bankruptcy since a mechanic’s lien is not deemed to be created through a legal proceeding and, therefore, is not barred by the bankruptcy code. However, a lien foreclosure action is deemed to be a legal proceeding and, although a mechanic’s lien may be enforced against the owner of the property after he filed his petition in bankruptcy, the claimant should consult with his attorney for the best way to proceed to foreclose the lien.
The process of perfecting and enforcing a mechanic’s lien is somewhat different than filing a foreclosure action in a state court where the owner has filed bankruptcy. One of the first things a claimant must do is file a proof of claim in the bankruptcy court.
Claimants cannot act to create, perfect or enforce any lien against the property of an owner who files a petition in bankruptcy unless done so within the rules and regulations of the Federal Bankruptcy Court. 11 U.S.C. § 362(a)(4) to -(5) (2006). All claims, proceedings and actions against the owner are stayed unless exempted under 11 U.S.C. § 362. In order to continue with a foreclosure action in a state court, a mechanic’s lien claimant who becomes a party in interest in the bankruptcy proceeding may request, after notice and hearing, relief from the automatic stay. The claimant may, as an alternative, file an adversary proceeding in the Federal Bankruptcy Court for foreclosure of the mechanic’s lien. 11 U.S.C. § 362(d). If a mechanic’s lien is proved valid under state law, the federal bankruptcy law requires that the lien be satisfied before the claims of non-secured creditors. In addition, federal bankruptcy law recognizes a valid preference requiring satisfaction before the claims of secured creditors when the mechanic’s lien is prior to the position the of claims of those secured creditors.
The process of perfecting and enforcing a mechanic’s lien is somewhat different than filing a foreclosure action in a state court where the owner has filed bankruptcy. One of the first things a claimant must do is file a proof of claim in the bankruptcy court.
Claimants cannot act to create, perfect or enforce any lien against the property of an owner who files a petition in bankruptcy unless done so within the rules and regulations of the Federal Bankruptcy Court. 11 U.S.C. § 362(a)(4) to -(5) (2006). All claims, proceedings and actions against the owner are stayed unless exempted under 11 U.S.C. § 362. In order to continue with a foreclosure action in a state court, a mechanic’s lien claimant who becomes a party in interest in the bankruptcy proceeding may request, after notice and hearing, relief from the automatic stay. The claimant may, as an alternative, file an adversary proceeding in the Federal Bankruptcy Court for foreclosure of the mechanic’s lien. 11 U.S.C. § 362(d). If a mechanic’s lien is proved valid under state law, the federal bankruptcy law requires that the lien be satisfied before the claims of non-secured creditors. In addition, federal bankruptcy law recognizes a valid preference requiring satisfaction before the claims of secured creditors when the mechanic’s lien is prior to the position the of claims of those secured creditors.
posted by Randy B. Birch @ 12:10 AM
0 Comments:
Post a Comment
Links to this post:
Create a Link
<< Home