What happenes to Warranties when the builder goes BK?

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<p>When a builder goes BK, assuming Chapt 11, not liquidation, what happens to the warranties? Specifically,</p>

<p>Will the builder continue to honor the warranties while in BK? </p>

<p>Will the builder honor the warranties while emerging from the BK? </p>

<p>If other builders buy the company in BK court, will the new owner honor the warranties? </p>

<p>thanks!</p>
 
<p>It depends on the BK and what happens in BK court.</p>

<p>If it is just a restructing (Chapter 13), there should be no effects.</p>

<p>If it is a belly-up BK (Chapter 11), the BK courts basically sell the company's assets to the highest bidder. Previously-sold homes are not assets and thus cannot be sold. Generally, the owner is out of luck. You can still sue a BKed company (a corporation never really dies) but unless it has assets, insurance, or could find the contractor/subcontractors involved in the project, you are basically out of luck.</p>

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Are the subs legally binded to fix their work after the builder goes BK under chapter11? The subs have contracts with the builder not with the home owners.
 
<p>Generally, one would sue the general contractors/developers and the GC/developer sues the subs. </p>

<p>Hypothetically, one could make an argument that a homeowner is a third-party beneficiary of the contract between the subs and general contractor but I have not seen a case where homeowners sue a sub directly. </p>
 
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