When Your Contractor Disappears Overnight:
what To Do Before You Do Anything

1. Don’t Rush to Replace Your Contractor

If you woke up to news that your contractor shut down, you are not stuck. You are in a legal maze. That is different. A maze has exits. You just need a map before you move.

Here is the hard truth. Hiring a replacement tomorrow can make things worse. You need to know where the money will come from, what work is actually left, and what risks live at your jobsite. Until you have those answers, wait.

2. Know Your Options for Financial Recovery

Let’s talk about the Minnesota Contractor Recovery Fund. You have heard it will make you whole. It will not. The total payout for all claims against a single contractor is capped at $550,000. That is for everyone combined. Most closures blow past that number fast.

To apply you usually need a court judgment first. You must submit detailed project documents. Payments are released only twice a year, in June and December. Expect eight to twelve months before any check arrives. Expect less than your full loss. The process is paperwork heavy and deadline driven. An attorney can help you file it right and protect your other options.

Now bankruptcy. Most homeowners land in the pool of unsecured creditors. Secured creditors get paid first. Whatever crumbs remain are divided among everyone else. Recovery takes time and is rarely full. If you do not file a proof of claim with the bankruptcy court, you get nothing. Again, the claim process is technical. Get help.

3. Protect Yourself from Liens and Double Payments

There is more. Even if you paid your contractor, unpaid subcontractors and suppliers may record mechanics’ liens against your property. Minnesota law favors paying the people who did the work or furnished the materials. That can mean owners risk paying twice if money did not flow down. If you see a lien notice, call a lawyer. Deadlines come fast and solutions depend on details.

So what should you do today? Gather facts. Contracts. Change orders. Proof of payments. Photos. Inspection cards. Permit records. Emails and texts. Then sit with a lawyer for a short consult. You want a plan that addresses fund claims, bankruptcy steps, lien defenses, and a clean path to finish the project without paying twice.

4. Smart Steps for Contractors Taking Over a Project

Contractors, this part is for you. Slow down. Your prospective customer wants the job done quickly and right. You need to know you will be paid in full and on time, no matter what happens with recovery funds or the bankruptcy court. If the customer’s money is contingent, your work cannot be certain.

Start from zero. Re-scope the project based on what exists today, not what someone promised. Re-estimate materials and labor at current prices. Inspect. Photograph. Document. Limit your warranty to your work only. Use milestone payments tied to verified progress. Include clear change order rules and a discovery clause for hidden conditions. If permits have not transferred, do not swing a hammer.

Beware the common traps. Inheriting the prior contractor’s promises. Starting before funding is real. Letting your payment depend on a check that might arrive next winter. One bad takeover job can erase the profit from several good ones. The easiest money to lose is the money you think is guaranteed.

5. Get Legal Guidance Before You Act

The right next step for homeowners is a focused legal consult. We review your documents, map funding, check permit status, and structure the sequence so you do not pay twice and do not stall out.

The right next step for contractors is a strategy session before you bid or mobilize. We help you price for reality, protect cash flow, and set terms that keep you out of the ditch while you deliver a solid project.

If you are an affected homeowner, email ([email protected]) or call (651-484-4412) MNCLS and get on our schedule for a strategy meeting. We’ll review your papers and you’ll leave with a solid plan of action. If you are a contractor considering a takeover job, call before you quote. Move with a plan, not a promise.