Section 46 Impact of Bankruptcy Filings

• Library: Mechanics Liens 2015

D. (§46) Impact of Bankruptcy Filings

Often, the reason a lien claimant is unpaid for its work is that the other party to the contract is in bankruptcy or is about to be placed in bankruptcy. If a general contractor owes money to the lien claimant and has also filed bankruptcy proceedings, the lien claimant must still take the usual steps necessary to file and preserve its mechanic’s lien claim, such as filing the lien within the six-month period. Although the general contractor/debtor may be protected by the automatic stay in bankruptcy, the lien claimant’s efforts to “perfect” its claim by filing do not violate the automatic stay provisions of the Bankruptcy Code. See II Mo. Construction Law §9.96 (MoBar 2^nd ed. 2004, 2009); Kenny’s Tile & Floor Covering, Inc. v. Curry, 681 S.W.2d 461, 468 (Mo. App. W.D. 1984). But proceeding with a lawsuit to “enforce” the mechanic’s lien action against the debtor and the property owner does violate the automatic stay. This is usually not troublesome for two reasons:

The lien claimant may file a motion with the subject bankruptcy court and request relief from the automatic stay to...