Construction Suppliers Beware: The Bankruptcy Code's Automatic Stay May Bar Post-Petition Perfection of Your Lien Rights

Most states have enacted statutes that allow creditors providing goods and/or services to a contractor on a construction job to file a "mechanics' lien" or "construction lien" directly against a third-party owned construction project in which (a) the creditor provided goods and/or services to the contractor, (b) the contractor used the goods and/or services on the construction project, and (c) the contractor had not paid for the materials or services. Under certain circumstances, the creditor might also be able to benefit from its lien rights by stepping into the contractor's shoes and directly collecting the project owner's indebtedness to the contractor.