Sheet Metal & Air Conditioning Contractors’ National Association


Contracts Bulletin No. 5 - Part 2: Getting Paid in the Event of a General Contractor Bankruptcy

May 28, 2020

Contracts No5Construction contracts present unique problems in bankruptcy. This is because these contracts involve the rights and obligations of at least three separate categories of persons: owners, general contractors, and subcontractors.

A bankruptcy filed by a general contractor jeopardizes a subcontractor’s right to payment. When this happens, the subcontractor should be ready to act. This Contracts Bulletin provides insight into bankruptcy and presents the steps that a subcontractor might take to protect its interests.

Topics covered in this bulletin include:

  • Bankruptcy Overview
    • Chapter 7 Liquidation
    • Chapter 11 Reorganization
    • Commencement of Bankruptcy
    • Having to Give Money Back to the Debtor
  • Subcontractor Remedies
    • Mechanic’s and Materialmen’s Lien
    • Other Approaches to Receive Payment
    • Trust Funds’ Statutes
    • Express Trusts
    • Constructive Trusts
    • Use of Joint Payee Checks
    • Bonds
    • Restitution Claim

Contracts Bulletin No 5 - Part 2 was prepared by SMACNA’s general counsel. All members are encouraged to read this latest update.

Miss the Contracts Bulletin No. 5 - Part 1 on Payment and Retainage? Download a copy or access previous Contracts Bulletins here.