Virgin Orbit Shuts Down. Emalfarb Law Gets Contractor Paid.

In the complex world of bankruptcy, securing outstanding debts can be a formidable challenge. This was precisely the scenario when Emalfarb Law found itself representing a general contractor embroiled in the bankruptcy proceedings of Virgin Orbit. With an outstanding debt of $200,000 hanging in the balance for work performed on the property, the stakes were high, and time was of the essence.

The Virgin Orbit Bankruptcy Saga

Virgin Orbit, a prominent player in the rocket industry, had declared bankruptcy, sending shockwaves throughout its network of subcontractors and creditors. Among them was a general contractor facing the daunting task of recovering a substantial debt. The situation was dire, as Virgin Orbit had failed to secure crucial funding and had to resort to laying off a significant portion of its workforce.

Emalfarb Law Steps In

Emalfarb Law, known for its expertise in navigating complex bankruptcy cases, was entrusted with representing the interests of the general contractor. Recognizing the urgency of the matter, the legal team at Emalfarb Law immediately sprang into action.

The Mechanics Lien: A Lifeline in Bankruptcy

Understanding the importance of a mechanics lien in bankruptcy cases, Emalfarb Law swiftly contacted its local counsel in California to prepare and file a mechanics lien. This strategic move was a game-changer. Here's why a mechanics lien played a pivotal role in securing the general contractor's accounts receivable:

Secured Creditor: By filing the mechanics lien, the general contractor now became a secured creditor. In bankruptcy, being a secured creditor provides a higher level of protection for your claims because your debt is backed by specific assets, which can be used to repay your owed amount before unsecured creditors. Unsecured creditors, on the other hand, have no collateral backing their claims, making it more challenging for them to recover their debts in full during bankruptcy proceedings.

Strengthening Legal Position: Filing the mechanic's lien and taking the necessary steps in the bankruptcy proceeding can move you from the back of the line to front of the line.

Secured Accounts Receivable

Thanks to Emalfarb Law's swift action in having the mechanics lien prepared and filed, submitting the Proof of Claim, the general contractor's outstanding balance was now secured, and their position in the bankruptcy proceedings was substantially improved. In the end, the client received 100% of its claim amount. This was a significant victory in a challenging landscape where creditors often face uncertainty and risk substantial losses.

In conclusion, the case of Emalfarb Law representing a general contractor in the Virgin Orbit bankruptcy underscores the vital role that a mechanics lien can play in such situations. It's a powerful tool for subcontractors and creditors to protect their interests and secure outstanding payments.

The Virgin Orbit case demonstrates why filing an Illinois mechanic lien before a customer files bankruptcy is critical. A properly recorded lien can elevate a contractor from an unsecured creditor — who may receive cents on the dollar — to a secured creditor with priority over the encumbered property.