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I’m a contractor, and have to close my business. What about unpaid liens?

That makes you a candidate for what’s called chapter 20: a chapter 7 case followed by a chapter 13 case.

Under Article 3A of the New York Lien Law, first moneys paid to a contractor for construction are received in trust for paying laborers, subcontractors, and material suppliers. Failure to keep records of these accounts and/or failing to pay them results in a trust fund claim under Article 3A. That claim is not dischargeable in bankruptcy.

It may be possible to separately classify the nondischargeable claim in a chapter 13 case. If an objection is raised to the separate classification and full payment of that claim in chapter 13, the bankruptcy solution is a chapter 20 case: a chapter 7 followed by a chapter 13.

The chapter 7 case is filed first to discharge all your other debts that are covered by the chapter 7 discharge: just about everything except student loans, recent taxes and domestic support obligations. The chapter 13 case is then used to pay the Article 3A claim in full, or as close thereto as possible.

 

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