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If my company is dissolved and has filed Ch7 bankruptcy, does the company still have the right to lien the contractor's bond to recoup money owed? The contractor has ignored all requests for payment in the past year.

  • What is the situation that leads to the contractor owing you? I'm not saying he doesn't, I just wasn't clear on why. – Putvi Apr 30 '19 at 20:03
  • At their request, we completed warranty work they were responsible. We sent them an invoice a year ago, but are ignoring our request for payment. They also pulled us off a job without giving us proper notice as stated in the contract and we incurred expenses relating to this. A lien on their contractor's bond should cover the money owed us. – Soula Apr 30 '19 at 20:59
  • So both parties are (or were) contractors and your former company is owed money from another contractor who refuses to pay and kicked you off the project? – Putvi Apr 30 '19 at 21:05
  • Basically, I don't understand why this wasn't handled during the bankruptcy, unless the amount you are owed is small. – Putvi Apr 30 '19 at 21:12
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If my company is dissolved and has filed Ch7 bankruptcy, does the company still have the right to lien the contractor's bond to recoup money owed?

No.

When the company filed a Chapter 7 bankruptcy, its right to the payment was automatically transferred to the bankruptcy estate by operation of law. The bankruptcy estate's right to collect that asset is controlled, in practice, by the Chapter 7 bankruptcy trustee appointed to the estate (for the benefit of the general creditors of the estate).

So, if those funds were collected, they would first go to pay outstanding claims in the bankruptcy and not to the company's owners, unless of outstanding claims in the bankruptcy were paid in full.

Also, in the case of a corporation, unlike an individual, a Chapter 7 bankruptcy doesn't actually discharge any of the debts. The corporation still owes them even after the bankruptcy is over. This is done so that people don't trade shares in failed corporations in order to get the tax losses.

Usually a Chapter 7 trustee will only pursue a claim like this if it is cost effective to do so, i.e. would produce a net benefit to unsecured non-priority creditors net of attorneys fees incurred to collect the debt, which it often isn't.

  • Either way, it shouldn't be done outside the original case. – Putvi May 1 '19 at 18:50
  • @Putvi I'm suggesting that the Chapter 7 trustee's decision not to try to collect that asset and hence to let the contractor off the hook was probably an economically rational one. – ohwilleke May 1 '19 at 18:52
  • I agreed with you. – Putvi May 1 '19 at 18:58

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