Filing for bankruptcy can add significant challenges to a construction project, but it does not always mean the project has to stop. In New Jersey, construction companies facing financial trouble may still have options to complete their work while navigating bankruptcy.
By following the right steps and using the resources available to you, it will still be possible to guide your business to a favorable outcome.
Filing for the right type of bankruptcy
Bankruptcy offers different protections depending on the type of filing. Chapter 11 bankruptcy allows businesses to reorganize their debts and continue operations. This form of bankruptcy can be especially helpful for construction companies, as it lets them restructure their finances while fulfilling contract obligations. Under Chapter 11, the business can renegotiate terms with creditors and secure funding to continue the project.
Understanding the uncertainty of bankruptcy
Keep in mind that bankruptcy will place your existing contracts under review. If the court deems any contract too burdensome, it may allow the other party to reject it. This process can create uncertainty for ongoing construction projects, especially if any project partner questions your company’s ability to finish the job.
There is also the possibility that subcontractors and suppliers who have not received payment may file a mechanic’s lien against the project. This could complicate your company’s ability to secure new funding. You will need to address these claims carefully to avoid further delays.
The benefits of bankruptcy
When you file for bankruptcy, all collection efforts against your company must stop. This includes lawsuits, repossessions and wage garnishments. For a construction company, this pause may give you the time you need to reorganize and develop a plan to complete the project. Creditors will no longer be able to seize assets or halt progress through liens.
A well-thought-out plan during the bankruptcy process will help you complete ongoing projects. Managing relationships with creditors and stakeholders, as well as staying compliant with New Jersey construction laws, can help a business emerge from bankruptcy triumphantly.
