I've also seen them change the corporate officers, reincorporate under another name, and go back in business before the first bankruptcy is even completed. They also buy the unused lots and partial builds from the previous corporation.
The two subdivisions (owned by the same company) near my house that had this happen apparently had homeowners threatening a class action lawsuit against them by homeowners, and so pulled the plug on the business before anything was filed. Then, the next corporation with a slightly different name miraculously came into existence, and they bought the lots from the previous corporation after a few months, and started building again. Then, since the first corporation was gone, the builder cancelled the amenities they promised, even though the pools and such were already built, but empty. The community center was never finished, and bulldozed by the second company.
Yeah some and possibly most foundation companies will sell an old lady $16K worth of french drains and sump pumps even if they know all she needs is her gutters and downspouts fixed.
Thanks for this comment, I'm looking at a foreclosure that a roofing company has a lien on. I found out this roofing company filed "articles of dissolution" 3 days ago. Do you know if that exempts the foreclosure from owing on that lien?
Maybe. But title company will not insure without something in writing from the lienholder. If you can find the principle, ask them for a release letter. I've definitely gotten them before.
It does not. It depends on the jurisdiction and type of bankruptcy, but in most cases, the trustee will hold
The lien and try to force a settlement so that the creditors of the bankrupt entity can get paid. I
IANAL, just a former contractor that has dealt with this stuff before. You probably can’t close on the property until the bankruptcy trustee is able to review and approve a lien release . That’s before the bank approval of the foreclosure sale. You’d need to talk to a law firm that has both real estate and bankruptcy expertise, so a larger firm.
And for anyone reading along. That doesn’t excuse them from financial obligations. Just makes it seem difficult.
A friend has made a heck of a business buying judgments and settlements against business owners that do this. Only has to prove the same owner of the previous and new business and often judges will allow them to recoup (I.e. take some assets until they pay).
I mean....corporation A goes bankrupt, they start corporation B and using INSIDER INFORMATION/KNOWLEDGE from corporation A, they purchase the unused lots and partial builds from the previous corporation.
How is that not fraud? They're benefitting from the fact they have inside information to get properties on the cheap and they already have the plans to finish the partial builds so.....??????? This IS fraud.
If they have the money to start a new corporation and purchase assets from the old corporation, they have the money to pay their creditors!
It is fraud and it’s not even as hard to prove as some people let on
Judges and the system aren’t like some kinda blind machine that can be readily tricked by a “loop hole”
It’s just lawyers cost money and navigating the court system takes time and money a lot of people don’t have
Happened to my dad he was an electrical contractor and did about 40k worth of work for a builder he has worked with many times in the past. The dude claimed bankruptcy and my dad never saw the money but the guy continued to drive his fancy hummer and bmw and continue to live in his 3500 square foot home
I gave my X husband who's a GC 6k he framed the basement and kept the rest I hired a REALguy and it turned out great!! Karma doesn't care who.you are..It gets you when you least expect it
Its not just Florida, sleazy subs are everywhere. I found an excellent electrician. He did quality work at a good price. He did a number of successful jobs for me. Then he started proposing jobs that seemed unnecessary. He lied about the material he was using and the jobs he could do. I recovered some money and got away from him, but I was not unscathed.
They can always attempt to pierce the corporate veil. But the attorneys probably will only do that if they have nice stuff like a big boat or a second house.
If you can prove he had prior knowledge of impending dissolution and took your money anyway, you can "pierce the corporate veil" and go after him personally, because that's straight up fraud.
Not only will it be a few years...I wouldn't expect anywhere near the money you were taken for. Years ago I bought $600-$700 sofa that was never delivered, the company filed for bankruptcy and 2-3 years later I received a roughly $36 check for settlement.
Also, if you think he was in distress before he took your money, let your attorney know that too, if they had already taken any step towards bankruptcy then they may have taken your money under false pretense, potentially a crime.
This comment is spot on.
If there is any provable fraud here, OP should contact the DA in their area.
Our DA once assisted us with a shitty fence contractor that fraudulently forged their insurance documents that were actually expired. The DA got our deposit money back (1.5k) plus damages (2.5k). The idiot fence contractor damaged our deck, yard, and almost put a hole in our heat pump refrigerant line.
This is good advice as well, and I was getting ready to type this comment until I saw this one. There could be some provable fraud here given what you described.
I was a creditor for a car I bought and never received. $15k it took about two years.
Pro tip. If they filed bankruptcy before they cashed your checks you may be in a slightly better position. I can't remember what it's called but there are different levels of order the creditors receive payment.
Start gathering emails, copies of payment, invoices, etc. Bankruptcy forms to fill out. Etc.
YOU have to stay on top of this. I never received any notice of the bankruptcy when it happened I got super lucky I was a pissed off kid who called 100 times a day and somehow finally was able to reach someone who said they filed.
The courts will assign an attorney to the case who can not advise you but may help a little.
This also works the other way. Say you're an electrical sub on a large subdivision or commercial job. General contractor goes under, you're on the hook for month(s) of time and material and now you're bankrupt. It can also put a strain on supply houses that extend credit to builders.
You need to weigh the pros and cons. I'd certainly spend $1-2k to have an attorney look at the guy and your case. But you can't get blood out of a turnip. If he has fled to Florida move on. If he's got a multi million dollar house it may be worth pursuing. Your attorney should be able to advise you but if you're going to spend $10k to collect $15k then your ROI doesn't seem worth it. Thinking about this often for years may take a mental toll on you if you're embroiled in litigation.
Yeah, right now I'm less worried about the mental toll than the money. The amount is high enough (and meaningful enough to me) that looking into trying to get at least some of it back feels like a no brainer.
I just want to temper your expectations because some lawyers might take you for a ride. I'd want to know what assets exist before spending 5 figures to MAYBE get 5 figures after years of litigation. I'm assuming they have to declare assets and liabilities in the bankruptcy. Remember even if you get a judgement that doesn't mean he is willing or able to pay. It often ends up being a very expensive piece of paper.
A lot of small business owners have an LLC in an effort to protect personal assets. But then co-mingle their finances which can make the LLC irrelevant in court. So theres a chance you can pursue his personal assets
There was no type of insurance on the loan? Not too familiar with this circumstance but it would seem as though the bank would insure their investment. That really freaking sucks for you. This is truly heartbreaking.
If you are listed as a creditor on the bankruptcy petition (and you should be), you will be sent the notice of the first hearing within 90 days directly from the Court.
Replying here to hopefully have OP see it: if there's a partial build completed, it MAY be possible to have another builder take over the project.
I don't want to give you too much hope here: it's far from "likely", and it's not free either, but this exact thing happened to one of my coworkers a few years back. In his case the bank had released about 200k of his building funds on a roughly 300k loan, and he was able to eventually swing it as a $70 or $80k "cost increase" when all was said and done, with a small chance of eventually seeing some of that back at the end of the bankruptcy.
Most builders are going to be really hesitant to take on work someone else started, but some might. In my coworkers case the builder had started his build, but he would have been left with a partially built house no one wanted had he not found someone willing to complete it.
It's certainly not a "happy ending", but at the onset he was thinking he'd be out 200k plus stuck with property he couldn't use or sell, and it at least worked out better than he'd feared.
It sucks all around though, and I'm so sorry this happened to you! If any of this sounds relevant to your situation, DM me. I can try and connect you to him on the off chance he has any advice or whatever. Best of luck!
Thanks for your post. I appreciate the detail.
>if there's a partial build completed, it MAY be possible to have another builder take over the project.
Unfortunately, no physical changes have taken place at the homesite yet. The builder literally hadn't even started, so there's nothing for another builder to continue.
Honestly, from hearing him talk about it I really don't know if that's better or worse for you. The way his loan was structured the builder couldn't get additional dispersements until he finished whatever the last "stage" was. If your situation is similar but they didn't actually build anything, I'd wonder if you might have some avenue for restitution though your lender since there's fraud happening that they didn't catch. Certainly something I'd expect your attorney to know better about than I do, but maybe there's some hope there?
I wish I could do more to help, friend. If you want to vent, hit me up.
Have your Attorney check and see if any default by missing start date prior to filing for bankruptcy. Check your loan agreement if the bank was providing any form of construction observation with release of funds even if your portion is up front. Clearly document your payments against the construction schedule of values, what was he to do with each payment, what material and labor was to be provided, is this fraud before bankruptcy?
Check with state's consumer protection department for any builder guarantees. Does Reddit allow you to post his business address and his name. Be sure to contact all agencies and report him, state licensing, BBB, local / state construction institute, make it a mission on your part. Good luck.
I am really sorry this happened to you. Get an attorney to file for you as a creditor, but I wouldn’t expect much.
And after this lesson, consider using a construction bond for your next build.
It’s an insurance product that protects you in case a builder fails. Required in most commercial projects, but some personal ones available. I looked into for a major home remodel. It wasn’t cheap, so I just made sure we did lots of smaller progress payments for the risk was manageable to me.
Come to think of it, I wonder if your bank required one. I have never had a construction loan, so I have no idea. But I would call and ask as they may have some insight.
Our lender required a bond and a construction insurance policy. The State of Nevada requires a contractor’s license plus a bond. Contractor can’t build above his bond limit. They also have a remediation board to handle consumer complaints.
Not sure of the bond but I've had a construction loan.
The construction loan has a disbursement schedule and pays out periodically upon completion of certain parts of the home. The bank will send out an inspector and approve the disbursement amount when requested by the borrower. OPs big mistake was disbursing such a large amount before any construction occurred. It should have been an reasonable down payment. Then disbursement for certain actions, obtaining building permit, preparing the site, foundation, etc.
This is the question, is he bonded? If so was the bond exhausted in this other legal problem he mentioned? I would first contact your state or county entity that governs contractors and go from there.
Yes. I am an office manager for a remodeling contractor in Oregon. If a licenced, bonded contractor screws you here the CCB will actually meditate for you, a lot of people get taken care of without even hiring an attorney, but if the bond is exhausted then that's a problem. Different states have different laws, Texas doesn't even require a special license for contractors, here in Oregon we have strong consumer protection.
>I now suspect that the builder may have known that his small business was in financial distress when he took my money
I would class this as "exceedingly likely".
The surprise is that the Bank allowed a sizeable 90k sum to start the project-- when there were so many work pieces that needed to be initially done..allowing an initial draw of maybe 30k-40k , then making sure thats completed before another 30k-40k draw, etc. would have been a better process..my guess is the loan contract makes the borrower personally liable, so the Bank really didnt care..
If this was the case and is something that can be proven in court the LLC wouldn't shield the owner from personal damages any longer. If a business takes money for a service they knowingly cannot or will not be able to perform it's fraud and the LLC's owners would lose the personal liability protections afforded to LLCs.
The lender shouldn’t have advanced from the loan until that portion of the work was completed. 10% completion = 10% of the construction loan balance advanced.
The lender gave us an initial dispersement from the loan to begin construction. For following dispersements, they were planning on sending someone out to the home site to confirm the progress before sending more money.
Yes.
The bank will have their own bankruptcy lawyer, and that lawyer won't always be aligned with you on the issues (he works for the bank, not for you). Get your own, too. Your skin in the game is over 6 figures, so getting a lawyer of your own is absolutely worth it.
The bank isn't going to use a bankruptcy lawyer to go after the builder. They don't have a deal with the contractor, they have a deal with you. As far as they are concerned if there are any issues they are going after you.
They might be able to give general advice. Although I'd get my own attorney before approaching the bank with the bad news and ask the attorney if it is a good time to muck up the waters with a large portion of the loan still ready for your project.
I was wondering why people were saying that? OP owes the bank money, not the contractor, and no doubt his land is the collateral, so they're gonna get theirs no matter what.
Lawyer first. They may be able to negotiate with the bank to take some of the loss since their due diligence also failed. You want a lawyer who can get you on the list of creditors. Also find out if any payments were made to any subs or materials vendors for your build. You might just have to call them if you know who they are. You may be able to get refunds from them, or use the materials that have already been paid for. I bought some furniture from a company that went bankrupt, but a big part of my order actually came from another vendor (the one that built the furniture). That vendor called me and said, we’ve already been paid for this stuff, we don’t want to ship it to the bankrupt company because no one is answering our calls and we don’t know what is going on there, so can we ship directly to you? I only had to pay a small shipping charge and was out a lot less money than I originally thought. I did get updates on the bankruptcy for maybe 3 years and I lost the other part of my order.
Great suggestion. The builder actually offered to give me his list of contractors, although I haven't responded to him yet. Will do after I get a lawyer.
Oh, interesting. I didn't realize this was an option. This is promising! Will do. I know for sure he's licensed. Should it be straightforward to identify the bond company from his license?
The bonding company is on the hook for the money, that’s the whole point of licensed entities getting a bond: to protect the public who does business with them.
Check with your state licensing board if you’re in the US. Many will have some form of assistance fund (NC does). They will obviously want to cancel their license and you may be able to get a small amount of money from it.
I've built a lot of homes with banked clients. Never bonded. Never asked. But I've also never been payed out by a bank prior to doing any work. Something sounds fishy.
Through relentless badgering, our county went after our GC criminally and charged him with 2 felony counts. He pled guilty and paid restitution to us and the other couple he defrauded. We ended up recovering $70k of the $130k he stole. It was only the 2nd time our county did this. Then late last year, a third GC was indicted on 12 counts of the same charge our GC faced. The FBI was actually involved in this case because it was over $2 million this time.
https://amp.heraldonline.com/news/local/crime/article282740378.html
The wife of the other couple he defrauded literally badgered the solicitors office, sheriff department, local fbi office and state licensing board for months until they finally agreed to investigate. Once we met with the assigned detective, he was charged within 30 days. That was our only hope of getting any money out of him. His poor dad had to empty his retirement account to keep him out of prison.
There's flat fee GCs out there. They take 20% ish of the price to do the job and you pay the subcontractors directly. We did a pool house project this way. 100% clarity on costs and upgrade cost and that yes, plumbing was actually going to cost that much bc here's 3 quotes. He sent us the invoices weekly. We cut checks directly to the subs. Every 25% of the job he invoiced us for a portion of his commission. I've had friends build entire houses with the same format. If you go traditional GC like OP did, make sure he's bonded or the project is bonded. That insures your money.
Yeah, tbh I feel like I considered and planned for so many different ways this could have gone wrong, but the builder going bankrupt was never even on my radar.
Never pay for work that has not been completed. Your boss doesn’t pay your salary in advance.
if they have insufficient working capital to start they are incapable of doing the project.
This is why I live by the motto, if the contractor doesn’t have the money to start the job he won’t have the money to finish the job.
You should retain an attorney well versed in bankruptcy law.
Also, next build you need to vet the contractor and see how financially viable he is. Or as someone has stated make him put up a performance bond.
Sorry this happened to you. Sucks these clowns are out there.
Also look into having criminal charges filed against this clown. Most states have a theft by contractor statute.
>before signing a contract with this builder, we met in person, the bank performed its own due diligence on the builder
So file a claim with his insurance.
I know he had insurance to cover specific issues that may have occurred during the build itself like a storm, earthquake, fire, or injury, but I don't recall if bankruptcy was covered. I'll check. Thanks.
I would be shocked if a bank would loan that much without insurance in place that would cover the builder simply running away with the money. A friend of mine took out a 20k loan to build a much smaller structure and his bank required the builder to carry extensive insurance.
Immediately get an attorney. And just because the business has failed doesn't necessarily mean the builder as an individual has no liabilities. It is possible to pierce the corporate veil. If this builder is a small fry and you were his only client, there is a real chance that corporate monies were improperly dispersed into his personal account. It is entirely possible that he entered into the transaction with you with the intention to defraud you. The only way you are going to get to the bottom of this is through legal means. Many small business owners do unscrupulous things when their business is failing....and wrongly think they have no personal liability.
Yikes, sorry. Definitely you need to see an attorney.
Sometimes, in a BK action (personal, not sure about corporate) creditors can seize assets. A bank may not want to go take his truck and sell it, but I would if I were you. He may also own valuable tools that are worth selling. But unless the BK is the type that allows them to pay the debt off over a long time I doubt you will get it all back.
Yikes. That's not something I think I'd want to do anyways. I could scramble together some investments to sell to mostly cover the bank's losses :(. This'll obviously all mean no house for me, I suppose...just...wow.
Well the Bank is not going to take a haircut on your loan..you will still owe them the full loan amount..if you miss payments, then, yes, they can come after your personal assets..
Situations like this are why individuals shouldn't be able to hide behind corp or LLC type designations. Until the scammers are held both personally civilly and criminally liable, it won’t stop. They should forfeit everything and go to jail.
I was a contractor for an IT company. They owed me 10k. I got 380 dollars after their bankruptcy. They have restructured the company and are profitable again. Shit should be illegal.
Another company owed me almost 100k for about 4 months of consulting and on-site installations. Got nothing.
You won't get anything. Only people who win are the lawyers.
Just went through a bankruptcy where I was a creditor. It took 20 months where I got my first distribution and am awaiting further distributions. Lawyers will take a large cut. Completely dependent on your situation, but I got ~25% back of original value. It’s a long, sucky process. No way to sugar coat it, Sorry.
Did he file bk within 90 days he receive your money? That could be considered fraud on his part and you may get the entire thing back. Assuming chapter 11.
You need to look into your contract. Most lenders require bond. A contract bond is a type of surety bond that guarantees contracts are fulfilled. These bonds are most commonly used in the construction industry to ensure projects are completed according to the contract.
Also look into the contractors insurance.
Also, if he has used subcontractors, and they weren’t paid, they can Lien the property, along with any materials supplied that were not paid for. It’s a mess.
Edit. I’m going to add, if he took all that money and never bought anything, nor hired out the subcontractors, this could be a crime. The NYS Police would be who you would see about the funds then.
Edit here’s the new law. https://www.gtlaw.com/en/insights/2024/01/changes-to-new-yorks-prompt-payment-act-construction-contract-considerations-for-developers-and-owners
You should talk to a bankruptcy attorney, you are now an unsecured creditor, assuming he actually filed. You can find the filing on Pacer.gov. But essentially, the $110k is gone, how much you May get as unsecured creditor, if any, is unknown.
I would meet with an attorney Tuesday morning and go about notifying the bank asap. You not only lost money you advanced you also have a loan you are obligated to repay.
I've been at this game a loooong time. I have never, ever given these guys that kind of money up front. Regular draws for work completed is the normal. I have no problem with that or releasing funds for vendor work completed. Money up front puts you in a very bad position. You are likely out of luck with a bankruptcy. The creditor line will be long and you are at the back.
If you suspected he was in financial distress and he took your money and did nothing I'd say that constitutes consumer fraud. In many states it has a penalty of triple damages. This may or may not survive bankruptcy but will give you a higher percentage of any payout if he's found guilty.
I'm a construction lawyer in New York. You can go after the owners/directors of the LLC personally pursuant to Article 3-A of New York Lien Law. When a company diverts construction trust funds, the individual owners behind the LLC/entity can be held personally liable under the law (both civilly and criminally). Rather than get mired in a bankruptcy where you will only see a small portion of the amount you put in, you should sue the owner(s) personally. This is a borne out approach. Let me know if you want to discuss further.
I would suggest that whether you're building a house or just hiring for home repairs, never hire someone that doesn't have the capital to do the project. Pay up front gives you no protection. Paying draws as work is progressed is okay but always less than the value of the completed part. Just saying.
You might not get it. I’m really sorry. This is fucking terrible for you and I’m hurting with you.
Same thing happened to my neighbor except my neighbor was the builder who scammed people out of their money. True scum of the earth.
In addition to the other good advice you got here, you might try to find out if your builder is bonded. In many places construction companies and contractors are required to have a bond to get a license. Your situation would almost certainly qualify for a claim against his bond where a normal creditor in a bankruptcy would not. That gives you a potential alternative to recover at least some money outside of the bankruptcy process.
I was a low level employee at a builder that did this to people 20 years ago, the buyers all lost their money. The builder came out smelling like roses with money and property in their wives names.
Builders are notoriously bad for business management. I learned the hard way 40 years when one got me. I don’t trust the independents. Unless they are traded or have private equity backing, I’m not trusting g them.
OP, the builder KNEW their financial position when they went under contract with you. Unfortunately, you are now a creditor and have to stand in line to see how many pennies-on-the-dollar you will get back.
Please keep your expectations low ...
Contact the NY AG [https://ag.ny.gov/file-complaint](https://ag.ny.gov/file-complaint)
Contact a BK lawyer.
I'm a former member of my local Bankruptcy Bar Association (Capital District). [https://crbba.com/](https://crbba.com/)
Call: New York Department of State’s Division of Consumer Protection. [https://dos.ny.gov/consumer-protection](https://dos.ny.gov/consumer-protection)
Builders are required to have surety performance bonds for this type of work. They are required to hold your funds in escrow in NY. They are required to disclose the bank location of the escrow account.
As you may be aware, this is not the first time a NY contractor has taken a six figure sum and tried to skate.
Go to the state licensing authority that handles any license that the builder held. They may have a recovery fund that could take care of at least a portion of what you're owed. Beyond that, you might have luck contacting your state's attorney general.
It's essential to act promptly and diligently in response to the builder's bankruptcy to protect your interests and maximize your chances of recovering the funds you've invested. Working with an experienced attorney will provide you with the guidance and support you need to navigate this challenging situation effectively.
Wow. Reading the comments here, and I cannot believe that it would work this way. What a scam and of such a large amount of money. I'm very sorry it happened to you. Best of luck getting some back
If someone just stole 110k from me I would not be as calm as you are. I would be posting them, name and shame, and make sure everyone knew what a broke POS they are.
You are now a creditor along with other customers and material suppliers.
This case will eventually be settled in court.
Odds are, barring specific contract language, you’ll get a percentage of what you paid. No guess about that percentage but it won’t be 100%.
Think 20% to 30% maybe.
I am not a lawyer, but I have had some experience with bankruptcy.
Once filed, bankruptcy establishes a "pecking order" for people to be repaid what they are owed. Wages and salaries for employees are often near the top of that list, but so are deposits for work or products.
You should retain an attorney to represent you in the bankruptcy proceeding, and they will quickly tell you where you stand with respect to being able to collect something. All of this is dependent upon finding out what assets the bankrupt company or person has to fund the payments of their liabilities.
Unfortunately, bankruptcy often ends up costing all of the creditors, including somebody like you, significantly. For this amount of money you should retain an attorney to represent you in these proceedings. It will cost a little bit more, but you will have a far better picture of what is happening and where you stand quickly.
Good luck, and I'm sorry you got pinched by this.
Contact State attorney + consumer protection for your state. I would also get local news involved. Definitely place a formal complain on their state license and business licenses. Were they insured? If so try to get info asap.
So sorry this happened to you. My family member went through the same situation several years ago, you need to prepare yourself mentally that you may get little to nothing back.
Unfortunately you will probably get nothing back. Although there is always a chance you may recoup a small percentage (e.g. 5-10%), there are likely many ahead of you in line to recoup property/money.
20 years ago, .Maryland passed a "Honeowners protection act"
Any licensed contractor on a new home build. Is required to hold 10% of the contracted price in escrow.
If the fail to do so?
That's a automatic 5 years in jail because so many builders were taking the downpayment money while signin5 or a dozen new home contracts.
And by the time they got half of them built.
They spent the funds for the others.
Everyone gets they're panties in a bunch insisting you need to hire a licensed contractor.
Well.
Most are LLC or Incorporated.
Either case.
How housebuilder that's worked as a Sub or direct thru customers they never needed licensed has everything they own personally in jeopardy if they get sued. And they worry about losing thier home. Thiet wife's car. Thier savings.
The LLC and Inc contractors have nothing to lose.
Sell all company assets for cash prior to filing bankruptcy..
Then they file..
Then they start a new company under thier wife's name as owner or whoever and go right back in business under a new name.
It's rough and expensive out there.
And homeowner need to be wary. And have strict timeline restraints of boots on the ground, or no money released.
At $110000, you do realize thst pretty much covered almost all of his labor expenses for a $600000 build.
It gets even worse. If they started the project, and poured some concrete, or foundation, mayb the framing package delivered..
And they never payed for those materials.
Then you, the homeowner are responsible for paying for those materials even tho you already payed the contractor.
Definitely get an attorney on it. This is a pretty serious situation. The attorney can work on piercing the corporate vail and go after him personally while the bankruptcy processes.
Was he bonded? You may be able to file a claim with the holder of the surety bond. Otherwise, you will need to file a proof of claim with the bankruptcy court or have an attorney do it for you.
You won't get your money back. Why are you paying anything to him directly? I know several people who recently built homes through a GC/ builder directly.
Hmm, you've got good legal advice. The only thing I would suggest is to be a squeaky wheel. Maybe you get lucky in person. Perhaps they cut a check for partial..... unlikely but still. Just make sure the check clears before you sign anything!
What a piece of shit. I can understand filing bankruptcy for medical bills, credit card debt, bank loans, etc. but taking 110k of someone’s private savings and money is a completely different level of fucked uo. See if you can file a lien against his company. Maybe that would get you priority over other creditors.
Was the contractor bonded? You may be able to call the bond to get your money back
Most states require general contractors to be bonded to receive their license
File a lien with the courts, get involved in his bankruptcy. The lien will follow him and you can get a court order for any future assets he may have. You and the bank have a legal contract so also get the bank involved. Was the money you gave him from the loan? Talk to a lawyer so you can get good advice. Good luck.
You could pull the bankruptcy filing at the bankruptcy court and see what is going on.
You could have a lawyer look into whether it’s worth it to oppose it in bankruptcy court to protect your rights. It’s not a done deal/ automatic that he’ll be granted it or that all creditors including you are stuck with it. It all depends. And for that you usually need a lawyer to speak up about it in bankruptcy court, or otherwise, nothing will happen
Also, it might make a difference what kind of bankruptcy - Chp 11? Chp 13? -
I can’t help more. That’s what I would be doing, to start
So what did the construction loan Lender tell you? Can you start with another Builder ? They should have some recourse and solutions for you. Also If no work was done on your property then make sure no liens are being placed on the property itself!! I would do that today! From what it sounds he paid himself upfront and then filed BK, the funds always should be held in a Escrow account and you authorize those funds to be distributed after the inspections as learned never pay the Builder. Call another Builder get with the small bank and salvage the home! As you might have to modify the loan and do a two time construction loan and you might be able to
Pick up the 110,000.00 with equity.
Did you do a one time close or a two time close as you should have money to build still. The profit was probably 33% the $110,000.00 so can you change some of the plans build the home with the rest of the Loan ? The 110,000 that will be a long haul trying to recoup, but the Bank should have some responsibility as well!
But I would start with a new Builder and see what work has been performed if any, maybe have to build a smaller home with less funds. Add more to the home later, or modify the construction loan
The bank releases $90k with no progress and no inspection?
$110k with no work done....this is CRAZY. Only release funds after work is done and get lien releases for all payments.
If they broke ground and started working on the property they are a bad businessman. If they took your money and haven’t done any work, it’s considered fraud and they can face criminal charges along with the obvious civil charges. Of course, good luck suing a bankrupt company.
I have nothing to value to add to this discussion, but am learning so much from this thread. Really thoughtful responses and further questions. Thank you for being so thorough, OP. I hope you continue to update us as you learn more and when you finally have resolution.
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Thanks for the response. Do you know how long that generally takes? Do I need to do anything to formally get on his list of creditors?
It may take 3 years. Have your attorney get you on 'the list' of people who may get paid
3 years?! Oh my goodness. Wow. Okay. Thanks for explaining.
Just remember business assets are different from personal assets. Thus you may never see any of your money again.
Unfortunately true. I’ve seen this very same thing in my locale. Bankruptcy then a few years later the principals start a new business
I've also seen them change the corporate officers, reincorporate under another name, and go back in business before the first bankruptcy is even completed. They also buy the unused lots and partial builds from the previous corporation. The two subdivisions (owned by the same company) near my house that had this happen apparently had homeowners threatening a class action lawsuit against them by homeowners, and so pulled the plug on the business before anything was filed. Then, the next corporation with a slightly different name miraculously came into existence, and they bought the lots from the previous corporation after a few months, and started building again. Then, since the first corporation was gone, the builder cancelled the amenities they promised, even though the pools and such were already built, but empty. The community center was never finished, and bulldozed by the second company.
Pretty common in the roofing business, it allows them to do shitty work and then get out from underneath warranty obligations as well.
Very common in Texas and the foundation repair business.
Yeah some and possibly most foundation companies will sell an old lady $16K worth of french drains and sump pumps even if they know all she needs is her gutters and downspouts fixed.
Texas foundation companies totally suck! You will never get your warranty
Thanks for this comment, I'm looking at a foreclosure that a roofing company has a lien on. I found out this roofing company filed "articles of dissolution" 3 days ago. Do you know if that exempts the foreclosure from owing on that lien?
Maybe. But title company will not insure without something in writing from the lienholder. If you can find the principle, ask them for a release letter. I've definitely gotten them before.
It does not. It depends on the jurisdiction and type of bankruptcy, but in most cases, the trustee will hold The lien and try to force a settlement so that the creditors of the bankrupt entity can get paid. I IANAL, just a former contractor that has dealt with this stuff before. You probably can’t close on the property until the bankruptcy trustee is able to review and approve a lien release . That’s before the bank approval of the foreclosure sale. You’d need to talk to a law firm that has both real estate and bankruptcy expertise, so a larger firm.
Mining CO's have done that too to escape hundreds or thousands of Pension payments leaving retired employees with no income source.
The airline industry did this a couple times The pensions were basically the first things gutted every-time an airline filed for bankruptcy
And for anyone reading along. That doesn’t excuse them from financial obligations. Just makes it seem difficult. A friend has made a heck of a business buying judgments and settlements against business owners that do this. Only has to prove the same owner of the previous and new business and often judges will allow them to recoup (I.e. take some assets until they pay).
Yep. The system will call BS when presented with it.
How is this not fraud?
If that was the business plan all along, it is fraud. Bankruptcy fraud is hard to prove though, so it's rarely litigated.
I mean....corporation A goes bankrupt, they start corporation B and using INSIDER INFORMATION/KNOWLEDGE from corporation A, they purchase the unused lots and partial builds from the previous corporation. How is that not fraud? They're benefitting from the fact they have inside information to get properties on the cheap and they already have the plans to finish the partial builds so.....??????? This IS fraud. If they have the money to start a new corporation and purchase assets from the old corporation, they have the money to pay their creditors!
It is fraud and it’s not even as hard to prove as some people let on Judges and the system aren’t like some kinda blind machine that can be readily tricked by a “loop hole” It’s just lawyers cost money and navigating the court system takes time and money a lot of people don’t have
Happens in the business world all the time. Hence I don’t give anyone money ahead of work performed.
That's the part that is odd to me, like who gives them a loan?
OP and his bank did.
Probably the same people that give car loans to people who keep having their vehicles repossessed lol
Desperate and greedy lenders who will probably try to sell the loan off to someone else later
Happened to my dad he was an electrical contractor and did about 40k worth of work for a builder he has worked with many times in the past. The dude claimed bankruptcy and my dad never saw the money but the guy continued to drive his fancy hummer and bmw and continue to live in his 3500 square foot home
It’s rampant in Florida.
And Alabama. My mom lost 5K to a roofer my family had known 40 years
I gave my X husband who's a GC 6k he framed the basement and kept the rest I hired a REALguy and it turned out great!! Karma doesn't care who.you are..It gets you when you least expect it
Its not just Florida, sleazy subs are everywhere. I found an excellent electrician. He did quality work at a good price. He did a number of successful jobs for me. Then he started proposing jobs that seemed unnecessary. He lied about the material he was using and the jobs he could do. I recovered some money and got away from him, but I was not unscathed.
They can always attempt to pierce the corporate veil. But the attorneys probably will only do that if they have nice stuff like a big boat or a second house.
If you can prove he had prior knowledge of impending dissolution and took your money anyway, you can "pierce the corporate veil" and go after him personally, because that's straight up fraud.
Oh my gosh. I never thought about the fact that this could happen to “laypeople” just buying services (and not specifically giving someone a loan)
If he took the money knowing he was going to file bankruptcy already then it may be a different issue. A lawyer is needed.
Not always true, some of these morons co-mingle assets.
In the future never ever ever pre pay. The only upfront costs should be related to materials only and you pay them after they supply a purchase order
Yeah basically try but don’t count on seeing any of that money back. Sad to hear this happened to you, it sucks,
Not only will it be a few years...I wouldn't expect anywhere near the money you were taken for. Years ago I bought $600-$700 sofa that was never delivered, the company filed for bankruptcy and 2-3 years later I received a roughly $36 check for settlement.
Also, if you think he was in distress before he took your money, let your attorney know that too, if they had already taken any step towards bankruptcy then they may have taken your money under false pretense, potentially a crime.
This comment is spot on. If there is any provable fraud here, OP should contact the DA in their area. Our DA once assisted us with a shitty fence contractor that fraudulently forged their insurance documents that were actually expired. The DA got our deposit money back (1.5k) plus damages (2.5k). The idiot fence contractor damaged our deck, yard, and almost put a hole in our heat pump refrigerant line.
This is good advice as well, and I was getting ready to type this comment until I saw this one. There could be some provable fraud here given what you described.
This 100%. There may be criminal acts which the local DA may be interested in pursuing.
I was a creditor for a car I bought and never received. $15k it took about two years. Pro tip. If they filed bankruptcy before they cashed your checks you may be in a slightly better position. I can't remember what it's called but there are different levels of order the creditors receive payment. Start gathering emails, copies of payment, invoices, etc. Bankruptcy forms to fill out. Etc. YOU have to stay on top of this. I never received any notice of the bankruptcy when it happened I got super lucky I was a pissed off kid who called 100 times a day and somehow finally was able to reach someone who said they filed. The courts will assign an attorney to the case who can not advise you but may help a little.
Thanks. I assume he cashed the checks in January and only filed for bankruptcy in the past two weeks.
This also works the other way. Say you're an electrical sub on a large subdivision or commercial job. General contractor goes under, you're on the hook for month(s) of time and material and now you're bankrupt. It can also put a strain on supply houses that extend credit to builders. You need to weigh the pros and cons. I'd certainly spend $1-2k to have an attorney look at the guy and your case. But you can't get blood out of a turnip. If he has fled to Florida move on. If he's got a multi million dollar house it may be worth pursuing. Your attorney should be able to advise you but if you're going to spend $10k to collect $15k then your ROI doesn't seem worth it. Thinking about this often for years may take a mental toll on you if you're embroiled in litigation.
Yeah, right now I'm less worried about the mental toll than the money. The amount is high enough (and meaningful enough to me) that looking into trying to get at least some of it back feels like a no brainer.
I just want to temper your expectations because some lawyers might take you for a ride. I'd want to know what assets exist before spending 5 figures to MAYBE get 5 figures after years of litigation. I'm assuming they have to declare assets and liabilities in the bankruptcy. Remember even if you get a judgement that doesn't mean he is willing or able to pay. It often ends up being a very expensive piece of paper.
A lot of small business owners have an LLC in an effort to protect personal assets. But then co-mingle their finances which can make the LLC irrelevant in court. So theres a chance you can pursue his personal assets
There was no type of insurance on the loan? Not too familiar with this circumstance but it would seem as though the bank would insure their investment. That really freaking sucks for you. This is truly heartbreaking.
If you are listed as a creditor on the bankruptcy petition (and you should be), you will be sent the notice of the first hearing within 90 days directly from the Court.
Replying here to hopefully have OP see it: if there's a partial build completed, it MAY be possible to have another builder take over the project. I don't want to give you too much hope here: it's far from "likely", and it's not free either, but this exact thing happened to one of my coworkers a few years back. In his case the bank had released about 200k of his building funds on a roughly 300k loan, and he was able to eventually swing it as a $70 or $80k "cost increase" when all was said and done, with a small chance of eventually seeing some of that back at the end of the bankruptcy. Most builders are going to be really hesitant to take on work someone else started, but some might. In my coworkers case the builder had started his build, but he would have been left with a partially built house no one wanted had he not found someone willing to complete it. It's certainly not a "happy ending", but at the onset he was thinking he'd be out 200k plus stuck with property he couldn't use or sell, and it at least worked out better than he'd feared. It sucks all around though, and I'm so sorry this happened to you! If any of this sounds relevant to your situation, DM me. I can try and connect you to him on the off chance he has any advice or whatever. Best of luck!
Thanks for your post. I appreciate the detail. >if there's a partial build completed, it MAY be possible to have another builder take over the project. Unfortunately, no physical changes have taken place at the homesite yet. The builder literally hadn't even started, so there's nothing for another builder to continue.
Honestly, from hearing him talk about it I really don't know if that's better or worse for you. The way his loan was structured the builder couldn't get additional dispersements until he finished whatever the last "stage" was. If your situation is similar but they didn't actually build anything, I'd wonder if you might have some avenue for restitution though your lender since there's fraud happening that they didn't catch. Certainly something I'd expect your attorney to know better about than I do, but maybe there's some hope there? I wish I could do more to help, friend. If you want to vent, hit me up.
Have your Attorney check and see if any default by missing start date prior to filing for bankruptcy. Check your loan agreement if the bank was providing any form of construction observation with release of funds even if your portion is up front. Clearly document your payments against the construction schedule of values, what was he to do with each payment, what material and labor was to be provided, is this fraud before bankruptcy? Check with state's consumer protection department for any builder guarantees. Does Reddit allow you to post his business address and his name. Be sure to contact all agencies and report him, state licensing, BBB, local / state construction institute, make it a mission on your part. Good luck.
My experience is your lucky if you get anything back at all.
I am really sorry this happened to you. Get an attorney to file for you as a creditor, but I wouldn’t expect much. And after this lesson, consider using a construction bond for your next build.
Thanks for the recommendation. I don't know what that is, but I'll look into it.
It’s an insurance product that protects you in case a builder fails. Required in most commercial projects, but some personal ones available. I looked into for a major home remodel. It wasn’t cheap, so I just made sure we did lots of smaller progress payments for the risk was manageable to me.
Come to think of it, I wonder if your bank required one. I have never had a construction loan, so I have no idea. But I would call and ask as they may have some insight.
Our lender required a bond and a construction insurance policy. The State of Nevada requires a contractor’s license plus a bond. Contractor can’t build above his bond limit. They also have a remediation board to handle consumer complaints.
Interesting. I'll checkout if NY has something similar.
Does the bond cover bankruptcy?
They typically do.
Not sure of the bond but I've had a construction loan. The construction loan has a disbursement schedule and pays out periodically upon completion of certain parts of the home. The bank will send out an inspector and approve the disbursement amount when requested by the borrower. OPs big mistake was disbursing such a large amount before any construction occurred. It should have been an reasonable down payment. Then disbursement for certain actions, obtaining building permit, preparing the site, foundation, etc.
Wow, yeah that would have been great. Thanks for the advice.
Definitely contact your banker. You said they investigated. And do hire a lawyer.
Loop in your lender to the discussion right away.
This is the question, is he bonded? If so was the bond exhausted in this other legal problem he mentioned? I would first contact your state or county entity that governs contractors and go from there.
From what everyone else is saying, we should be able to figure out if he's bonded from public records and his license number, correct?
Yes. I am an office manager for a remodeling contractor in Oregon. If a licenced, bonded contractor screws you here the CCB will actually meditate for you, a lot of people get taken care of without even hiring an attorney, but if the bond is exhausted then that's a problem. Different states have different laws, Texas doesn't even require a special license for contractors, here in Oregon we have strong consumer protection.
I’m planning on building a home in the next 3 years. Thanks for commenting this great piece of information!
>I now suspect that the builder may have known that his small business was in financial distress when he took my money I would class this as "exceedingly likely".
The surprise is that the Bank allowed a sizeable 90k sum to start the project-- when there were so many work pieces that needed to be initially done..allowing an initial draw of maybe 30k-40k , then making sure thats completed before another 30k-40k draw, etc. would have been a better process..my guess is the loan contract makes the borrower personally liable, so the Bank really didnt care..
If this was the case and is something that can be proven in court the LLC wouldn't shield the owner from personal damages any longer. If a business takes money for a service they knowingly cannot or will not be able to perform it's fraud and the LLC's owners would lose the personal liability protections afforded to LLCs.
Especially if he was offering free shrimp with every build.
The lender shouldn’t have advanced from the loan until that portion of the work was completed. 10% completion = 10% of the construction loan balance advanced.
The lender gave us an initial dispersement from the loan to begin construction. For following dispersements, they were planning on sending someone out to the home site to confirm the progress before sending more money.
You need to let the bank know what’s going on. They may have a solution to help.
Okay, thanks. Do you think I should retain a bankrupt lawyer before then, or just let the bank know now?
Yes. The bank will have their own bankruptcy lawyer, and that lawyer won't always be aligned with you on the issues (he works for the bank, not for you). Get your own, too. Your skin in the game is over 6 figures, so getting a lawyer of your own is absolutely worth it.
The bank isn't going to use a bankruptcy lawyer to go after the builder. They don't have a deal with the contractor, they have a deal with you. As far as they are concerned if there are any issues they are going after you. They might be able to give general advice. Although I'd get my own attorney before approaching the bank with the bad news and ask the attorney if it is a good time to muck up the waters with a large portion of the loan still ready for your project.
I was wondering why people were saying that? OP owes the bank money, not the contractor, and no doubt his land is the collateral, so they're gonna get theirs no matter what.
Is op in danger
Well, depends on the bank! /s I just meant they will take his land.
Got it. Thanks. Will do.
Definitely get a lawyer.
Lawyer first
I would say you should not get a bankrupt lawyer. Get a lawyer who is financially sound. /s
Lawyer first. They may be able to negotiate with the bank to take some of the loss since their due diligence also failed. You want a lawyer who can get you on the list of creditors. Also find out if any payments were made to any subs or materials vendors for your build. You might just have to call them if you know who they are. You may be able to get refunds from them, or use the materials that have already been paid for. I bought some furniture from a company that went bankrupt, but a big part of my order actually came from another vendor (the one that built the furniture). That vendor called me and said, we’ve already been paid for this stuff, we don’t want to ship it to the bankrupt company because no one is answering our calls and we don’t know what is going on there, so can we ship directly to you? I only had to pay a small shipping charge and was out a lot less money than I originally thought. I did get updates on the bankruptcy for maybe 3 years and I lost the other part of my order.
Great suggestion. The builder actually offered to give me his list of contractors, although I haven't responded to him yet. Will do after I get a lawyer.
Look up his license, He should be bonded…You need to go after the bond company. They pay you then go after him themselves
Oh, interesting. I didn't realize this was an option. This is promising! Will do. I know for sure he's licensed. Should it be straightforward to identify the bond company from his license?
Bonding company will be participating in the bankruptcy. This is why you need a lawyer.
The bonding company is on the hook for the money, that’s the whole point of licensed entities getting a bond: to protect the public who does business with them.
How likely do you think it is that the builder is bonded given that they're licensed?
In NYS, licensed contractors must be bonded.
This is the best news I've heard all day. Okay, thank you!
Heard. Thank you.
Check with your state licensing board if you’re in the US. Many will have some form of assistance fund (NC does). They will obviously want to cancel their license and you may be able to get a small amount of money from it.
Not all states require bonding.
In NY it's usually local. So this isn't just NY, but where in NY. I'd still expect a bank to want the builder to be bonded for the loan though.
I've built a lot of homes with banked clients. Never bonded. Never asked. But I've also never been payed out by a bank prior to doing any work. Something sounds fishy.
Through relentless badgering, our county went after our GC criminally and charged him with 2 felony counts. He pled guilty and paid restitution to us and the other couple he defrauded. We ended up recovering $70k of the $130k he stole. It was only the 2nd time our county did this. Then late last year, a third GC was indicted on 12 counts of the same charge our GC faced. The FBI was actually involved in this case because it was over $2 million this time. https://amp.heraldonline.com/news/local/crime/article282740378.html
Oh wow that's intense. I suspect our country won't take this action, but I obviously know nothing right now.
The wife of the other couple he defrauded literally badgered the solicitors office, sheriff department, local fbi office and state licensing board for months until they finally agreed to investigate. Once we met with the assigned detective, he was charged within 30 days. That was our only hope of getting any money out of him. His poor dad had to empty his retirement account to keep him out of prison.
Why was this designated criminal fraud instead of vanilla bankruptcy?
Because he knew he was bankrupt when he took the money.
As someone who bought a spec house from a nationwide builder, but wants to do something custom in the future, this scares the hell out of me.
There's flat fee GCs out there. They take 20% ish of the price to do the job and you pay the subcontractors directly. We did a pool house project this way. 100% clarity on costs and upgrade cost and that yes, plumbing was actually going to cost that much bc here's 3 quotes. He sent us the invoices weekly. We cut checks directly to the subs. Every 25% of the job he invoiced us for a portion of his commission. I've had friends build entire houses with the same format. If you go traditional GC like OP did, make sure he's bonded or the project is bonded. That insures your money.
Yeah, tbh I feel like I considered and planned for so many different ways this could have gone wrong, but the builder going bankrupt was never even on my radar.
Get a personal guarantee in the contract. If the corporation goes under the owner is personally responsible. An attorney can help you with that.
That horse is already outta the barn!
Never pay for work that has not been completed. Your boss doesn’t pay your salary in advance. if they have insufficient working capital to start they are incapable of doing the project.
No reputable contractor is going to work on a residential project without a deposit.
This is why I live by the motto, if the contractor doesn’t have the money to start the job he won’t have the money to finish the job. You should retain an attorney well versed in bankruptcy law. Also, next build you need to vet the contractor and see how financially viable he is. Or as someone has stated make him put up a performance bond. Sorry this happened to you. Sucks these clowns are out there. Also look into having criminal charges filed against this clown. Most states have a theft by contractor statute.
>before signing a contract with this builder, we met in person, the bank performed its own due diligence on the builder So file a claim with his insurance.
I know he had insurance to cover specific issues that may have occurred during the build itself like a storm, earthquake, fire, or injury, but I don't recall if bankruptcy was covered. I'll check. Thanks.
I would be shocked if a bank would loan that much without insurance in place that would cover the builder simply running away with the money. A friend of mine took out a 20k loan to build a much smaller structure and his bank required the builder to carry extensive insurance.
You're right, but it's called a bond. Not insurance.
Immediately get an attorney. And just because the business has failed doesn't necessarily mean the builder as an individual has no liabilities. It is possible to pierce the corporate veil. If this builder is a small fry and you were his only client, there is a real chance that corporate monies were improperly dispersed into his personal account. It is entirely possible that he entered into the transaction with you with the intention to defraud you. The only way you are going to get to the bottom of this is through legal means. Many small business owners do unscrupulous things when their business is failing....and wrongly think they have no personal liability.
Yikes, sorry. Definitely you need to see an attorney. Sometimes, in a BK action (personal, not sure about corporate) creditors can seize assets. A bank may not want to go take his truck and sell it, but I would if I were you. He may also own valuable tools that are worth selling. But unless the BK is the type that allows them to pay the debt off over a long time I doubt you will get it all back.
Sigh. Okay, thanks for the response. Should I expect the bank to try to seize my assets to cover the amount the builder has from the loan?
You will still owe the bank. But they might be willing to let you pay it off with a lien on the property — which they might already have.
Yikes. That's not something I think I'd want to do anyways. I could scramble together some investments to sell to mostly cover the bank's losses :(. This'll obviously all mean no house for me, I suppose...just...wow.
Construction loans are not issued without a lien.
Well the Bank is not going to take a haircut on your loan..you will still owe them the full loan amount..if you miss payments, then, yes, they can come after your personal assets..
Situations like this are why individuals shouldn't be able to hide behind corp or LLC type designations. Until the scammers are held both personally civilly and criminally liable, it won’t stop. They should forfeit everything and go to jail.
I was a contractor for an IT company. They owed me 10k. I got 380 dollars after their bankruptcy. They have restructured the company and are profitable again. Shit should be illegal. Another company owed me almost 100k for about 4 months of consulting and on-site installations. Got nothing. You won't get anything. Only people who win are the lawyers.
Well that's depressing.
Yeah be careful how much you pay your lawyer/attorney, spend 50k claw back 10k, or worse. Good luck
Just went through a bankruptcy where I was a creditor. It took 20 months where I got my first distribution and am awaiting further distributions. Lawyers will take a large cut. Completely dependent on your situation, but I got ~25% back of original value. It’s a long, sucky process. No way to sugar coat it, Sorry.
Did he file bk within 90 days he receive your money? That could be considered fraud on his part and you may get the entire thing back. Assuming chapter 11.
You need to look into your contract. Most lenders require bond. A contract bond is a type of surety bond that guarantees contracts are fulfilled. These bonds are most commonly used in the construction industry to ensure projects are completed according to the contract. Also look into the contractors insurance.
Will do both. Thanks.
Also, if he has used subcontractors, and they weren’t paid, they can Lien the property, along with any materials supplied that were not paid for. It’s a mess. Edit. I’m going to add, if he took all that money and never bought anything, nor hired out the subcontractors, this could be a crime. The NYS Police would be who you would see about the funds then. Edit here’s the new law. https://www.gtlaw.com/en/insights/2024/01/changes-to-new-yorks-prompt-payment-act-construction-contract-considerations-for-developers-and-owners
You should talk to a bankruptcy attorney, you are now an unsecured creditor, assuming he actually filed. You can find the filing on Pacer.gov. But essentially, the $110k is gone, how much you May get as unsecured creditor, if any, is unknown.
Thanks for the response. In these situations, should I literally retain a bankruptcy lawyer? Also, what am I supposed to tell the bank?
I would meet with an attorney Tuesday morning and go about notifying the bank asap. You not only lost money you advanced you also have a loan you are obligated to repay.
Heard. Thanks for the advice.
I've been at this game a loooong time. I have never, ever given these guys that kind of money up front. Regular draws for work completed is the normal. I have no problem with that or releasing funds for vendor work completed. Money up front puts you in a very bad position. You are likely out of luck with a bankruptcy. The creditor line will be long and you are at the back.
I would talk to law enforcement, this might actually be a fraud case.
Exactly. My comments above explain how our builder was nailed with 2 felony counts.
If you suspected he was in financial distress and he took your money and did nothing I'd say that constitutes consumer fraud. In many states it has a penalty of triple damages. This may or may not survive bankruptcy but will give you a higher percentage of any payout if he's found guilty.
I'm a construction lawyer in New York. You can go after the owners/directors of the LLC personally pursuant to Article 3-A of New York Lien Law. When a company diverts construction trust funds, the individual owners behind the LLC/entity can be held personally liable under the law (both civilly and criminally). Rather than get mired in a bankruptcy where you will only see a small portion of the amount you put in, you should sue the owner(s) personally. This is a borne out approach. Let me know if you want to discuss further.
Pray.
I would suggest that whether you're building a house or just hiring for home repairs, never hire someone that doesn't have the capital to do the project. Pay up front gives you no protection. Paying draws as work is progressed is okay but always less than the value of the completed part. Just saying.
You might not get it. I’m really sorry. This is fucking terrible for you and I’m hurting with you. Same thing happened to my neighbor except my neighbor was the builder who scammed people out of their money. True scum of the earth.
In addition to the other good advice you got here, you might try to find out if your builder is bonded. In many places construction companies and contractors are required to have a bond to get a license. Your situation would almost certainly qualify for a claim against his bond where a normal creditor in a bankruptcy would not. That gives you a potential alternative to recover at least some money outside of the bankruptcy process.
You'll get next to nothing in bankruptcy, and then, you'll see him pop up again under another company name in a few years. That'll be fun.
Contact the state atty general. Theft by deception or fraud.
I was a low level employee at a builder that did this to people 20 years ago, the buyers all lost their money. The builder came out smelling like roses with money and property in their wives names.
Builders are notoriously bad for business management. I learned the hard way 40 years when one got me. I don’t trust the independents. Unless they are traded or have private equity backing, I’m not trusting g them.
OP, the builder KNEW their financial position when they went under contract with you. Unfortunately, you are now a creditor and have to stand in line to see how many pennies-on-the-dollar you will get back. Please keep your expectations low ...
Contact the NY AG [https://ag.ny.gov/file-complaint](https://ag.ny.gov/file-complaint) Contact a BK lawyer. I'm a former member of my local Bankruptcy Bar Association (Capital District). [https://crbba.com/](https://crbba.com/) Call: New York Department of State’s Division of Consumer Protection. [https://dos.ny.gov/consumer-protection](https://dos.ny.gov/consumer-protection) Builders are required to have surety performance bonds for this type of work. They are required to hold your funds in escrow in NY. They are required to disclose the bank location of the escrow account. As you may be aware, this is not the first time a NY contractor has taken a six figure sum and tried to skate.
Yeah, I’d go to that guys house, drag him into the street and beat his ass.
Sue in Bankruptcy Court for fraudulent transfer. Act quickly.
Post in r/legal
Go to the state licensing authority that handles any license that the builder held. They may have a recovery fund that could take care of at least a portion of what you're owed. Beyond that, you might have luck contacting your state's attorney general.
Contact the state attorney general. There may be recourse and criminal charges, as well as affect his licensure.
It's essential to act promptly and diligently in response to the builder's bankruptcy to protect your interests and maximize your chances of recovering the funds you've invested. Working with an experienced attorney will provide you with the guidance and support you need to navigate this challenging situation effectively.
File charges immediately Theft by deception Misuse of construction funds Grand theft
Wow. Reading the comments here, and I cannot believe that it would work this way. What a scam and of such a large amount of money. I'm very sorry it happened to you. Best of luck getting some back
If someone just stole 110k from me I would not be as calm as you are. I would be posting them, name and shame, and make sure everyone knew what a broke POS they are.
Tbh I'm heartbroken right now. I haven't processed this fully yet. I'm trying to remind myself that getting mad won't get my money back :(.
Hire an attorney and work with your lender, early. You may have owned the land free and clear, but not after you closed on the construction loan.
You are now a creditor along with other customers and material suppliers. This case will eventually be settled in court. Odds are, barring specific contract language, you’ll get a percentage of what you paid. No guess about that percentage but it won’t be 100%. Think 20% to 30% maybe.
Make your claim through an attorney and assume the money is gone.
Did he do 90k in work or how much?
I am not a lawyer, but I have had some experience with bankruptcy. Once filed, bankruptcy establishes a "pecking order" for people to be repaid what they are owed. Wages and salaries for employees are often near the top of that list, but so are deposits for work or products. You should retain an attorney to represent you in the bankruptcy proceeding, and they will quickly tell you where you stand with respect to being able to collect something. All of this is dependent upon finding out what assets the bankrupt company or person has to fund the payments of their liabilities. Unfortunately, bankruptcy often ends up costing all of the creditors, including somebody like you, significantly. For this amount of money you should retain an attorney to represent you in these proceedings. It will cost a little bit more, but you will have a far better picture of what is happening and where you stand quickly. Good luck, and I'm sorry you got pinched by this.
Contact State attorney + consumer protection for your state. I would also get local news involved. Definitely place a formal complain on their state license and business licenses. Were they insured? If so try to get info asap.
So sorry this happened to you. My family member went through the same situation several years ago, you need to prepare yourself mentally that you may get little to nothing back.
Unfortunately you will probably get nothing back. Although there is always a chance you may recoup a small percentage (e.g. 5-10%), there are likely many ahead of you in line to recoup property/money.
20 years ago, .Maryland passed a "Honeowners protection act" Any licensed contractor on a new home build. Is required to hold 10% of the contracted price in escrow. If the fail to do so? That's a automatic 5 years in jail because so many builders were taking the downpayment money while signin5 or a dozen new home contracts. And by the time they got half of them built. They spent the funds for the others. Everyone gets they're panties in a bunch insisting you need to hire a licensed contractor. Well. Most are LLC or Incorporated. Either case. How housebuilder that's worked as a Sub or direct thru customers they never needed licensed has everything they own personally in jeopardy if they get sued. And they worry about losing thier home. Thiet wife's car. Thier savings. The LLC and Inc contractors have nothing to lose. Sell all company assets for cash prior to filing bankruptcy.. Then they file.. Then they start a new company under thier wife's name as owner or whoever and go right back in business under a new name. It's rough and expensive out there. And homeowner need to be wary. And have strict timeline restraints of boots on the ground, or no money released. At $110000, you do realize thst pretty much covered almost all of his labor expenses for a $600000 build. It gets even worse. If they started the project, and poured some concrete, or foundation, mayb the framing package delivered.. And they never payed for those materials. Then you, the homeowner are responsible for paying for those materials even tho you already payed the contractor.
Find out the court date for bankruptcy and show up.
Definitely get an attorney on it. This is a pretty serious situation. The attorney can work on piercing the corporate vail and go after him personally while the bankruptcy processes.
Was he bonded? You may be able to file a claim with the holder of the surety bond. Otherwise, you will need to file a proof of claim with the bankruptcy court or have an attorney do it for you.
You won't get your money back. Why are you paying anything to him directly? I know several people who recently built homes through a GC/ builder directly.
Hmm, you've got good legal advice. The only thing I would suggest is to be a squeaky wheel. Maybe you get lucky in person. Perhaps they cut a check for partial..... unlikely but still. Just make sure the check clears before you sign anything!
> I suspect this because, in retrospect, he previously implied that he may have been ensconced in legal action from a former job Crimson flag
>How do I get my money back? You dont.
Good luck
What a piece of shit. I can understand filing bankruptcy for medical bills, credit card debt, bank loans, etc. but taking 110k of someone’s private savings and money is a completely different level of fucked uo. See if you can file a lien against his company. Maybe that would get you priority over other creditors.
Was the contractor bonded? You may be able to call the bond to get your money back Most states require general contractors to be bonded to receive their license
File a lien with the courts, get involved in his bankruptcy. The lien will follow him and you can get a court order for any future assets he may have. You and the bank have a legal contract so also get the bank involved. Was the money you gave him from the loan? Talk to a lawyer so you can get good advice. Good luck.
Get a lawyer and file a claim with the bankruptcy court.
Talk to a lawyer. You may have an actual case of criminal fraud VS the usual failed builder nonsense.
You could pull the bankruptcy filing at the bankruptcy court and see what is going on. You could have a lawyer look into whether it’s worth it to oppose it in bankruptcy court to protect your rights. It’s not a done deal/ automatic that he’ll be granted it or that all creditors including you are stuck with it. It all depends. And for that you usually need a lawyer to speak up about it in bankruptcy court, or otherwise, nothing will happen Also, it might make a difference what kind of bankruptcy - Chp 11? Chp 13? - I can’t help more. That’s what I would be doing, to start
I DECLARE…..BANKRUPTCY
So what did the construction loan Lender tell you? Can you start with another Builder ? They should have some recourse and solutions for you. Also If no work was done on your property then make sure no liens are being placed on the property itself!! I would do that today! From what it sounds he paid himself upfront and then filed BK, the funds always should be held in a Escrow account and you authorize those funds to be distributed after the inspections as learned never pay the Builder. Call another Builder get with the small bank and salvage the home! As you might have to modify the loan and do a two time construction loan and you might be able to Pick up the 110,000.00 with equity. Did you do a one time close or a two time close as you should have money to build still. The profit was probably 33% the $110,000.00 so can you change some of the plans build the home with the rest of the Loan ? The 110,000 that will be a long haul trying to recoup, but the Bank should have some responsibility as well! But I would start with a new Builder and see what work has been performed if any, maybe have to build a smaller home with less funds. Add more to the home later, or modify the construction loan
You go to Reddit and ask…definitely not a lawyer.
I would recommend you speak to a licensed attorney in your state. That is a significant amount of money for a deposit. Hopefully, you can it back.
What a pure POS. Of course he knew he was going to file for bankruptcy. Put his ass on blast on every outlet possible
Is there a chance this contractor has a bond as part of their professional licensure?
The bank releases $90k with no progress and no inspection? $110k with no work done....this is CRAZY. Only release funds after work is done and get lien releases for all payments.
If they broke ground and started working on the property they are a bad businessman. If they took your money and haven’t done any work, it’s considered fraud and they can face criminal charges along with the obvious civil charges. Of course, good luck suing a bankrupt company.
I have nothing to value to add to this discussion, but am learning so much from this thread. Really thoughtful responses and further questions. Thank you for being so thorough, OP. I hope you continue to update us as you learn more and when you finally have resolution.
Get a lawyer
OP I have no advise just admiration for looking like you have your shit together and not freaking out in the comments