When the Contractor Files for Bankruptcy
As the economy has gotten worse, I receive phone calls from homeowners asking: what do I do if my contractor files for bankruptcy? First, the disclaimer. I am not a bankruptcy lawyer. The bankruptcy law changed within the last few years, and lawyers are required to issue a number of disclaimers before offering bankruptcy advice. So, I am not going to tell you how to file for bankruptcy, or which debts are dischargeable in bankruptcy and which are not.
If your contractor states that he is on the verge of bankruptcy, understand that you may never recover even if you can bring a claim against him. That is why it is important to take one's ability to collect into account prior to filing a lawsuit. In Massachusetts, tshere is a fund called the Guaranty Fund that will pay up to $10,000.00 of your damages if you obtain a judgment and your contractor files for bankruptcy. I do not know if other states have similar funds. In any event, I always say that the easiest thing for a contractor to give you is his time and labor. Keep that in mind when you are trying to resolve a dispute.