During the coronavirus pandemic, construction projects have come to a standstill. Contractors and contractors’ subcontractors have withdrawn, and some companies have filed for bankruptcy protection.

A bankruptcy filing is a scary proposition for many, especially in the construction industry where cash flow is critical to keeping projects running. In some circumstances, a bankruptcy filing can halt a project altogether.

In general, a company will be subject to an automatic stay once it files for bankruptcy. This means that all assets (physical and financial), accounts receivable, payable, and credit will be frozen in the bankruptcy trust. This can wreak havoc on a construction project, and the lack of funds can cause a lot of issues for those that have already invested in the project.

Most professional contractors are licensed and may also be bonded. These bonds are a form of insurance that protects the client in the event that a contractor does not honor their contractual obligations. If a contractor made it clear through their actions that they did not intend to complete the work on a project and then simply walked away from it, this is considered a repudiation of contract and could lead to legal action.

In the case of a contractor who has been paid but has gone out of business, you should contact your insurance provider to determine what the process is for filing a claim on the bond. In addition, you should reach out to any other subcontractors that were working on your project as they might have a different relationship with the contractor and might be more aware of the reason behind why the contractor disappeared.