by Ahmed M. Soliman, Esq.

Following the recent destruction of Hurricane Sandy, many New Jersey residents are in the process of rebuilding their homes. However, a recent ruling by the U.S. Bankruptcy Court for the District of New Jersey has made it clear that homeowners dealing with construction contractors should beware. Hiring reputable contractors and documenting their promises and progress is critical to avoiding a bankruptcy discharge a fraud the homeowner may have against the contractor.

In the recent bankruptcy case of In Re Rossi, homeowners who had hired a contractor to renovate their property argued that the debt due to them for breach of a home improvement contract is not dischargeable, despite the homeowners’ argument that it fell under the fraud exception to the Bankruptcy Code. Specifically, the homeowners argued that the contractor had misrepresented his experience and expertise, how he would spend their money and when the project would be completed.

This is a common complaint about homeowners dealing with contractors — projects are seldom completed on time or on budget. However, the Court in the Rossi case ruled that the homeowners had failed to prove that the contractor/debtor had misrepresented his experience in the home improvement business, the time of completion, or how their money would be spent. Unfortunately for the homeowners, they did not obtain the proper documentation to prove their case.

It is imperative that those who are renovating or rebuilding their home — whether they are victims of Hurricane Sandy or not — ensure that they hire reputable contractors and document all promises and progress, otherwise if they feel they are defrauded, the property owner may not be able to seek damages in Court if the contractors files for bankruptcy.

Those who have a pending lawsuit or claim against a contractor should speak with sound legal counsel immediately to avoid losing money they are entitled to recover.

Stark & Stark’s Bankruptcy and Creditor’s Rights Group can help. Our attorneys regularly represent property owners in construction litigation and bankruptcy matters throughout New Jersey and Pennsylvania.

For more information about how Stark & Stark can assist you in your litigation or bankruptcy matter, please contact Ahmed M. Soliman, Attorney at Stark & Stark, at 609-791-7010 or asoliman@Stark-Stark.com.

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