Contracts Bulletin: Getting Paid in the Event of a General Contractor Bankruptcy

Construction contracts present unique problems in bankruptcy. This is because these contracts involve the rights and obligations of at least three separate categories of persons: owners, general contractors, and subcontractors.

A bankruptcy filed by a general contractor jeopardizes a subcontractor’s right to payment. When this happens, the subcontractor should be ready to act. This Contracts Bulletin provides insight into bankruptcy and presents the steps that a subcontractor might take to protect its interests.

Topics covered in this bulletin include:

• Bankruptcy Overview
  • Chapter 7 Liquidation
  • Chapter 11 Reorganization
  • Commencement of Bankruptcy
  • Having to Give Money Back to the Debtor
• Subcontractor Remedies
  • Mechanic’s and Materialmen’s Lien
  • Other Approaches to Receive Payment
  • Trust Funds’ Statutes
  • Express Trusts
  • Constructive Trusts
  • Use of Joint Payee Checks
  • Bonds
  • Restitution Claim

Contracts Bulletin No 5 - Part 2 was prepared by SMACNA’s general counsel. All members are encouraged to read this latest update.