US Legal Forms
Legal Resources
Questions & Answers
Contracts
Can a developer in bankruptcy force us to complete our contract?

Can a developer in bankruptcy force us to complete our contract?

Full question:

We are an engineering firm working for a developer who has filed bankruptcy, The developer is trying to force to complete our work even though they have not paid us over 180K and the work will require another 90K to finish. Can they force to complete our contract if they are in default of payments?

Category: Contracts
Subcategory: Breach of Contract
Date: 04/07/2025
State: Georgia

Answer:

The ability of the developer to force you to complete the contract depends on the terms of your agreement with them. You should review the contract carefully to understand your rights and obligations, especially regarding payment defaults.

In general, a breach of contract occurs when one party fails to fulfill their obligations, such as making payments. If the developer is in default, you may have grounds to refuse to complete the work until you receive the payments owed.

If you decide to pursue legal action, you might consider the following points:

Breach of contract: This happens when one party does not meet their contractual duties, causing harm to the other party.
Remedies: If you experience a breach, you may seek remedies such as money damages to cover your losses or restitution to return to your prior position.
Specific performance: This is an equitable remedy that requires a party to fulfill their contractual duties, but it typically applies only when monetary damages are insufficient.

Additionally, promissory estoppel may apply if you relied on the developer's promise to pay, and it would be unjust not to enforce that promise.

Consulting with a legal professional can help clarify your specific situation and provide guidance on the best course of action.

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

What happens if the company I work for files bankruptcies?

If your employer files for bankruptcy, it may affect your employment status and any unpaid wages. In Chapter 11 bankruptcy, the company may attempt to restructure its debts and continue operations, but there could be layoffs or changes in employment terms. In Chapter 7 bankruptcy, the company typically ceases operations and liquidates assets, which may lead to job loss. Employees often become creditors and may have to file a claim to recover unpaid wages. Consult with a legal professional for guidance based on your situation.

What is Chapter 11 restructuring debt?

Chapter 11 is a form of bankruptcy that allows a company to reorganize its debts while continuing operations. This process enables the business to propose a plan to repay creditors over time, which can involve renegotiating contracts and reducing obligations. During this period, the company is protected from creditors, allowing it to stabilize and potentially return to profitability. It's essential for affected parties to understand their rights and options during this process.

Under which chapter of the bankruptcy code should a company file if it wants to restructure its debts but remain in business?

A company seeking to restructure its debts while remaining in business should file under Chapter 11 of the Bankruptcy Code. This chapter allows the business to propose a reorganization plan to repay creditors over time, enabling it to continue operations while addressing its financial issues. Chapter 11 is designed specifically for companies that want to maintain their business and work towards financial recovery.

What happens when a firm files for bankruptcy?

When a firm files for bankruptcy, it initiates a legal process to address its debts. Depending on the chapter filed, the company may reorganize its debts (Chapter 11) or liquidate its assets (Chapter 7). The filing triggers an automatic stay, preventing creditors from pursuing collections. The company must disclose its financial situation and work with the court to develop a plan for repaying creditors or liquidating assets. Employees and creditors may need to adjust their expectations based on the outcome.

What is Chapter 7 and chapter 13 bankruptcy?

Chapter 7 bankruptcy involves the liquidation of a debtor's non-exempt assets to pay creditors, typically resulting in the discharge of most debts. It is often used by individuals and businesses that cannot repay their debts. Chapter 13 bankruptcy, on the other hand, allows individuals to reorganize their debts and create a repayment plan over three to five years, enabling them to keep their property while making payments. Both chapters have different eligibility requirements and implications for debtors.

What happens to bonds when a company files for bankruptcy?

When a company files for bankruptcy, the fate of its bonds depends on the type of bankruptcy and the company's financial situation. In Chapter 11, bondholders may be restructured and receive new securities or a portion of the company's equity. In Chapter 7, bondholders may receive a portion of the liquidation proceeds, but often recover less than their initial investment. Bondholders should review the bankruptcy plan and consult with a financial advisor to understand their rights and potential recovery.