Calculate the mechanics lien priority amount for a subcontractor who filed their lien 45 days after completion when the general contractor filed bankruptcy 60 days after completion on a project where $150,000 remains unpaid to the general contractor.
Correct Answer
D) First priority up to $150,000
Properly filed mechanics liens in Virginia have priority over bankruptcy claims when filed before bankruptcy proceedings, giving first priority up to amounts due the general contractor.
Why This Is the Correct Answer
In Virginia, mechanics liens properly filed before bankruptcy proceedings commence have priority over bankruptcy claims. Since the subcontractor filed 45 days after completion and bankruptcy was filed 60 days after completion, the lien predates the bankruptcy filing. This gives the subcontractor first priority up to the unpaid amount ($150,000) owed to the general contractor.
Why the Other Options Are Wrong
Option A: Pro-rata with other creditors
Pro-rata distribution with other creditors applies in bankruptcy proceedings when claims do not have priority status. Because the mechanics lien was properly filed before the bankruptcy petition, it retains its lien priority and does not share equally with unsecured creditors.
Option B: No lien rights due to bankruptcy
The subcontractor does not lose lien rights due to the general contractor's bankruptcy. Properly perfected mechanics liens filed before the bankruptcy petition are protected property interests that survive the bankruptcy filing.
Option C: Second priority after bankruptcy trustee
The bankruptcy trustee does not automatically supersede a mechanics lien filed before the bankruptcy petition. While bankruptcy trustees have strong avoidance powers, a properly filed mechanics lien that predates the bankruptcy filing retains first priority over the property.
Memory Technique
Remember the timeline: Lien filed day 45, bankruptcy filed day 60. Lien came first = lien wins. Think: 'First in time, first in right' — the lien beat the bankruptcy clock.
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