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posted: 3/24/2013 5:00 AM

Foreclosure complicates unpaid work on house

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Q. I was hired to remodel a friend of a friend's basement about a year ago. He got into some financial trouble and couldn't pay the last $10,000 or so of the work. I recorded a mechanics lien on the property and my attorney told me to wait and see what happens.

In the last few days, I was served with some papers. It looks like the property is in foreclosure. My attorney tells me I need to hire someone to defend myself in the foreclosure lawsuit. I'm thinking I'm going to use up all the money that is owed to me on attorneys fees. And, I'm wondering why I'm being served by the sheriff. Are they looking for money from me?

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A. No one is looking for money from you. You were served in the foreclosure because you now have an interest in the property as a result of your lien. One of the purposes of a lender filing a foreclosure action is to terminate any and all interests in the property. Your interest in the property cannot be terminated until you are brought under the jurisdiction of the court, which is accomplished by serving you with a copy of the complaint.

You may be able to negotiate your lien directly with the lender. Try contacting the attorneys who are listed on the complaint. Advise them of your lien and ask if you could resolve the obligation. Unfortunately, in many instances, lenders will not negotiate with lienholders until just before or after they obtain a judgment, but it's worth a try. If they are willing to negotiate, expect them to offer no more than 50 percent to 70 percent of your claim.

If you cannot resolve your lien, you must, at the very least, file an appearance, answer and counterclaim to the complaint. The appearance is simply a form (and a fee) and the answer is a point-by-point response to the allegations in the complaint. Most of your responses to the complaint will be simply that you have no knowledge regarding the allegations, since you weren't the one that took out and defaulted on the loan.

The countercomplaint, however, is a little trickier, as it is actually a complaint for a foreclosure of a mechanics lien. You probably will need to retain an attorney for this step. By the way, the countercomplaint must be filed within two years of when you last did work at the property, work that is associated with your lien claim.

Not sure what to tell you about the attorneys fees, though you may be able to find an attorney who would let you make the court appearances, which would keep fees down.

A generally far cheaper alternative would be to simply sue the person who hired you for breach of contract. A lawsuit for breach of contract is far less complicated and you would probably obtain your judgment much quicker. The downside of proceeding this way is collecting.

When you obtain a mechanics lien judgment, you have the property itself to satisfy the judgment in the event you are not paid. In the event you obtain a judgment for breach of contract, you will have only the standard methods of collecting on the judgment, such as a wage garnishment or bank levy. If the judgment debtor is unemployed and broke, you will not have any source to collect on your judgment. The judgment, though, is good for seven years and can be revived. So, if three years from now your judgment debtor gets a job, you could then attach his wages. Of course, this means keeping track of him, which isn't always easy.

• Send your questions to attorney Tom Resnick, 345 N. Quentin Road, Palatine, IL 60067, by email to tdr100@hotmail.com or call (847) 359-8983.

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