Attorney Shea Krauskopf offers three tips for legal protection for creditors. If you’ve been working as a subcontractor, how can you ensure that you’ll be paid?

Tip One – Record an M&M Lien

Let’s say that you’ve done a project for another company and you haven’t been paid for that project. The best way to protect yourself is by recording what we call an M&M lien. This actually stands for a mechanic’s and materialman’s lien.

Basically, the most important thing you need to remember is to keep track of your timeline. The Texas M&M lien statute requires very strict notice provisions, depending upon whether you’re a general contractor, subcontractor, even a sub-subcontractor. These notice provisions generally require you to file a lien within two to three months after each month in which you performed labor.

The beauty of an M&M lien is that if it’s properly recorded, you can file a lawsuit to foreclose on that lien. This is an excellent way to protect rights as a creditor. Foreclosing on the project will allow you to satisfy your judgment.

Tip Two – Have the Business You’re Working for Sign a Credit Application

Another great way to protect your rights as a creditor is to use a credit application. Before performing any work, have the contractor that you’ve contracted with sign a credit application.

Generally, a well-written credit application will have a personal guarantee on it. This personal guarantee will also not only put the entity itself on the hook but then the person that signed the personal guarantee will be liable for the debt as well. So it’s a good way to bring another party into the lawsuit and put some pressure on more entities to pay you what you’re owed.

Tip Three – Contact a Business Attorney

Finally, another great way to protect your rights as a creditor is by just contacting an attorney. The attorney you contact will first do a lien evaluation.

If the lien is still available, your attorney can help you record the lien. If a lien is unfortunately not available, your attorney can start by sending a demand letter to the debtor.

This demand letter simply demands payment and additional attorney’s fees that you may have accrued. If an attorney does this and doesn’t hear from anybody, then the attorney can file a lawsuit seeking a judgment.

If a judgment is awarded, the attorney can then try to collect on that judgment by seizing the debtor’s assets. There’s a number of different ways to do that.

Please remember that when you contact an attorney, it’s important that you have all of your sent invoices or accounts receivable reports. It’s also helpful to provide some information about the debtor as well.

So these are the top three ways in which you can protect yourself as a creditor.