A Practical Guide for Construction Creditors in a Bankruptcy

BY ANTONY SANACORY & ALEXANDER J. BELL

As the structure of the U.S. economy changes in response to COVID-19, many bankruptcy filings are affecting the construction industry. At its core, federal bankruptcy laws are about debtor rehabilitation and fair and efficient treatment of the debtors’ liabilities. However, often those doing business with a company that declares bankruptcy are left by the wayside due to the hurdles and confusing procedure that accompanies a bankruptcy.

Most of the literature on this topic is “debtor focused,” meaning that it explains what to do to prepare if your company is filing bankruptcy. However, there is little practical guidance for contractors that are financially healthy but face a situation in which a customer, subcontractor, or vendor is entering bankruptcy. Completing a project on time while one of your vendors or subcontractors has just entered bankruptcy can be tricky for contractors that do not know the bankruptcy rules.

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