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Is a property owner liable to a material man if the contractor declares bankruptcy?

Is a property owner liable to a material man if the contractor declares bankruptcy?

Full question:

If the Contractor is a Corporation and declares Bankruptcy, is the property owner liable to material man?

Category: Bankruptcy
Date: 04/07/2025
State: Georgia

Answer:

When a corporation declares bankruptcy, it typically undergoes one of two processes: liquidation or reorganization.

In liquidation (Chapter 7 bankruptcy), the corporation’s assets are sold to pay creditors. Once the assets are distributed, the corporation ceases to exist, and any remaining debts are not forgiven since there is no entity left to pursue.

In reorganization (Chapter 11 bankruptcy), the corporation can keep its assets but must follow a court-approved repayment plan. This plan outlines how and when creditors will be paid. During this process, creditors cannot seek additional payments. If the corporation fails to adhere to the plan, it may be forced into liquidation.

In both cases, the property owner is generally not personally liable for the contractor's debts, including those owed to material suppliers, unless they have personally guaranteed the debts or there are specific contractual obligations that state otherwise.

This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.

FAQs

Who pays when a company files bankruptcy?

When a company files for bankruptcy, its assets are typically used to pay off creditors according to a court-approved plan. In a liquidation, assets are sold, and proceeds are distributed among creditors. In a reorganization, the company may continue operating while repaying debts over time. The responsibility for debts generally falls on the company, not the property owner or shareholders, unless personal guarantees exist.

What happens after a company files for bankruptcy?

After a company files for bankruptcy, an automatic stay is put in place, preventing creditors from pursuing debts. The company will either liquidate its assets to pay creditors or reorganize its debts under a court-approved plan. Creditors will receive information on how and when they will be paid, and the company must comply with the bankruptcy court's requirements throughout the process.

What happens if a corporation files for bankruptcy?

If a corporation files for bankruptcy, it enters a legal process to address its debts. In Chapter 7, the corporation's assets are liquidated to pay creditors. In Chapter 11, it can reorganize its debts while continuing operations. Creditors must follow the bankruptcy court's guidelines for claims and payments, and the corporation may emerge from bankruptcy if it successfully implements its repayment plan.

What happens when a corporation files for bankruptcy?

When a corporation files for bankruptcy, it initiates a legal process to manage its debts. This can involve liquidating assets to pay creditors or reorganizing under a repayment plan. The court oversees the process, and creditors are notified of their rights and the status of their claims. The corporation may continue operations during reorganization, but must adhere to court orders and repayment schedules.