The Use of Setoff in Bankruptcy to Resolve Conflicting Claims to Construction Contract Funds Covered by Texas Mechanic’s and Materialman’s Liens
Mockford, Philip Dale
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The purpose of this article is to review the law controlling a situation where a contractor has filed for bankruptcy after completing a contracted project for an owner but before paying the subcontracted amounts to various vendors leaving the owner with the unpaid contract amounts. In an effort to provide guidance to individuals in the position of the owner, it will be necessary to analyze two different bodies of law. First, an examination of Texas mechanic's and materialman's lien law will highlight the potential liability the owner faces from the contractor and the contractor's subcontractors and suppliers and the remedies the state law affords to avoid that liability. Second, the influence of the contractor's bankruptcy on this situation will be seen through an analysis of the relevant federal bankruptcy provisions.