Epicentre Contractors Turn to Bankruptcy

Contracting has always been a tough business. Subcontractors often make payroll and provide supplies and labor to a project months before they are paid by the general contractor or owner.

In the case of Charlotte’s Epicentre, a stop work order strangled cash flow for both the developer and the contractors. We’re still seeing clients whose financial difficulties began there and snowballed.

What’s a sub to do?

Before you let the lack of cash flow drive you to close your business, consult with an attorney about your options.  If filing a mechanic’s lien makes sense in your situation, the lien will attach to the property and structures and prevent the property owner from obtaining a clear title.

What we see in 2010

I was recently asked what’s different about the things contractors are telling me this year versus last? I replied that the only difference this year is numbers; the builders developers, subcontractors and materialmen we’re seeing tend to be higher end, who have been able to hold out longer (due to cash reserves, some cash flow, remodeling work, etc.). The assets are bigger and the liabilities are too. Same basic problem, though: the housing industry has tanked, with no real hope for improvement anytime soon, and what wealth these clients had is tied up in real estate that is often not worth what they paid for it.

We have some clients with decent remodeling income and some who are finding work with national or large regional builders, but many are seeking bankruptcy counseling and filing for bankruptcy protection. They don’t want to do it, but they have no choice.

Because so many contractors co-mingle business and personal finances, untangling the business from its owners can be messy. Consulting with a firm that has both bankruptcy and construction expertise is an important first step toward resolution.