Category Archives: Bankruptcy

Collecting A Debt from a Contractor

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Today a business owner asked me “what are my remedies when a contractor will not pay for my invoice for my final week of work?”. This was my response:

If you are a subcontractor working on a property, you can lodge a mechanic’s lien against the property. First you must send a written, signed letter demanding payment with a deadline for the contractor to comply. If he/she doesn’t pay, then file a lien. A lien is just a mark on the property’s title. It doesn’t guarantee payment. However, it does place pressure on the property owner to settle your dispute to keep the title clear.

You can on the other hand, sue the contractor. If you are in Philly and your claim is under $10,000, you can sue in small claims court. The result will be a judgment in your favor. A judgment doesn’t guarantee payment, either. It’s just a document declaring that the contractor legally owes you money. However, with a judgment you can garnish money from the contractor’s bank account, if he/she has a bank account.

If you suspect that your contractor has run out of money, then the new bankruptcy laws allow you force a business into bankruptcy. It’s very complicated process, but a serious option if your contractor owes you a large sum of money.

If you are fortunate enough to be working on a government contract, the contractor was required to post a bond to qualify for the contract. A bond is like an insurance policy. File a claim for payment with the contractor’s bonding company.

My business advice to you would be to speak with an attorney about the details of your situation and map out a cost-effective, yet realistic plan to get your money.

Sharmil McKee | Business Lawyer | blog@mckeeoffice.com

Our Business Bankruptcy Practice

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Our Bankruptcy Law group helps business clients, like you, analyze and proceed with Chapter 11 Reorganization filings. Our attorneys can guide you through all stages of the bankruptcy procedures, from settlement negotiations through bankruptcy discharge. We have developed a fixed-fee Business Bankruptcy Program to assist business with bankruptcy proceedings. Click here to learn more about the Business Bankruptcy Program. 

McKee Law Office is unique because we are a fixed-fee law firm. Prior to beginning any proceedings, we will provide you with a written preliminary litigation plan and an estimated budget. As a client of McKee Law Office, you are in control of your bankruptcy. In determining the best bankruptcy plan, we will analyze the bankruptcy’s impact upon your bottom line, your public relations, and your overall business goals. We are skilled at diplomacy and understand that though you are in dispute, your creditor may be a valuable client, employee, or vendor. Our goal is enable your business to remain operational throughout the bankruptcy proceedings. Call us today to schedule your free consultation to discuss your options.

Bankruptcy: maintain your business’ financial records

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February 9, 2007: Bankruptcy – Failure to maintain corporate financial records can support denial of discharge to individual debtor. 

The court recently re-enforced the rule that a business must maintain financial records to maintain its corporate shield. The court ruled that the Chapter 7 debtors’ failure to keep any record of the extensive prepetition transactions that they conducted on a cash-only basis, failure to prepare and file tax returns on their own behalf or on behalf of their closely-held corporations, and failure to maintain complete corporate records was such as to warrant a denial of their discharge under the “recordkeeping” discharge exception.

While the debtors’ closely-held corporations were not alter egos of the debtors, the fact that the debtors’ income and assets derived largely from these two corporations was itself sufficient to impose on the debtors an obligation to maintain records of these corporations’ financial dealings. The debtors explained that they could not afford to hire professionals to create and preserve complete financial records; the judge was not persuaded.

The citation to the case is In Re Spitko (2007 WL 1720242 (Bankr. E.D. Pa).