When the owner of a construction project files for bankruptcy, all participants on the project will feel the effects. Usually, the owner will seek to complete the project utilizing the bankruptcy tools at his disposal. Owners reorganizing under Chapter 11 can assume beneficial executory contracts or unexpired leases and reject others. This, alone, can extend or end the owner's relationship with a contractor or supplier. However, the power of assumption or rejection is tempered when it comes to collective bargaining agreements. Before the owner can reject a collective bargaining agreement, and concomitantly affect a multitude of laborers on the project, he must enter into negotiations with the union. If the union's representatives do not agree to the owner's proposed modifications or rejection of the agreement, a court will not accept the same absent a showing that the representatives' disagreement was not made in good faith and equity favored the owner's modification or rejection of the agreement.

The automatic stay that goes into effect on the filing of the bankruptcy petition will forestall collection efforts by secured parties. If the construction site property is subject to a mortgage, the automatic stay will halt ongoing mortgage foreclosure proceedings that have not yet resulted in judgment. However, these parties can file motions for relief from the stay to terminate its operation and allow them to pursue recovery from the owner. Additionally, the automatic stay will not prevent a secured party's perfection of statutory and purchase money liens that arose before the owner's bankruptcy filing.

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