One New Yorker, who filed for bankruptcy, faced a mechanic’s lien in her case, but the judge found that the case her contractor filed against her was fraudulent and bogus. The contractor claimed that the woman had committed fraud against them as reported by a December 17, 2012 New York Law Journal article.

The case started when a bankruptcy petitioner received almost $130,000 in insurance money for damages to her home. She paid nearly $30,000 of that to a restoration services contractor and paid the rest to another contractor. The judge found that this money was properly used, meaning that it was spent only on “rebuilding the petitioner’s house and protecting her family.”

The restoration contractor said that the woman had used some of the money from the insurance settlement for purposes other than its designated purpose. Consequently that contractor placed a mechanic’s lien on the woman’s assets meaning she owed that money to the contractor and that the contractor could get that money during the bankruptcy even as the debtor attempted to wipe out her debts.

The court noted that if an individual pays money to a contractor for work and then there is a fire and this money did not fund work for “remediation” of the property, then and only then is the contractor allowed to consider this money part of a “trust asset” from the “fire insurance policy.” In the judge’s decision, this was not what happened (the events occurred in the reverse order), so the creditor (the restoration contractor), was not “protected by [New York Lien Law.]” Therefore, the creditor had attempted to commit fraud and the judge went so far as to recommend that the debtor bring this to the attention of the New York State Attorney General.

If you are in debt and you are struggling to pay your mortgage or credit card bills, then bankruptcy may be an option to consider. You should review your options with an attorney. Jayson Lutzky is a Bronx, NY lawyer who offers free in person consultations. He can go over your personal situation and review your options. The consultation is entirely confidential. Call Mr. Lutzky’s office at 718-514-6619 to set up an appointment or visit for more information.