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Lien Creation and Lien Perfection: What's the Difference?
It is generally understood that materialmen, contractors, subcontractors and others (collectively called 'contractors') who perform labor or furnish materials on construction projects are entitled under state law to assert a mechanics' lien against real property for the value of the labor or materials they provide. What is less clear is the effect of a bankruptcy petition that is filed before the contractor has taken the necessary steps to create or perfect its rights.
It is not necessarily correct that Bankruptcy Code section 362(b)(3), which permits a contractor to take steps to perfect a mechanics' lien after a bankruptcy petition has been filed, provides a blanket exception to the automatic stay for any steps a contractor might take to advance its lien rights.
As explained below, there are important differences between lien creation, which is proscribed by the automatic stay, and lien perfection, which is sometimes excepted from the automatic stay, depending upon applicable state law. The Bankruptcy Code permits post-petition perfection on the theory that a lien holder should not lose its ability to perfect its lien under state law merely because the automatic stay intervenes. It does not, however, permit post-petition creation of liens.
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