Downturn Has Builders in Bankruptcy, or Just Getting Out

By Robert Struckman, 12-05-08

Small construction companies are seeking bankruptcy protection in Montana like never before, say Montana bankruptcy lawyers.

“They’re just getting out. Selling everything and going,” said James Screnar of Screnar Law Firm in Bozeman whose clients include North American Pipe and Welding of Three Forks.

Many of the contractors have filed for Chapter 7s—which amount to a liquidation—because they don’t see a future, Screnar said.

He described scenarios in which developers commissioned work but didn’t pay, while contractors and subs ordered materials—wood or drywall or pipe—on credit. When the developed couldn’t sell the homes, the contractors didn’t get paid, either. Many are stuck with the debts to suppliers.

“These guys couldn’t do a job if they got them,” Screnar said. “They’re too far in the whole to their suppliers.”

Screnar recently said he had filed six such bankruptcies and had a dozen or more in the pipeline.

“These guys are just pressed to the breaking point,” said attorney Greg Duncan of Helena. “They’re really hurting.”

Duncan has filed bankruptcies for a roofer, a general contractor and a plumber. He knows a guy who a year ago was considered a premier Helena high-end homebuilder. Today he’s pounding nails for another contractor. Others have sold their own houses to make bank payments on speculative homes they built for a boom that has vanished.

The number of personal bankruptcies in Montana has skyrocketed in recent months, making it difficult to sort the medical emergencies and layoffs from those being hammered more directly by the construction downturn.

Dick Sampson, a bankruptcy lawyer and trustee in Missoula, said small contractors who went deep into debt to buy expensive heavy equipment, and builders who bought lots and built spec homes for what seemed like a boom-without-end have been hit the worst.

But not everybody’s in terrible shape.

Wendell Baer of Baer Concrete sat in the cab of his idling pickup on Friday morning as he and Tim Workman put the finishing touches on an all-but-done remodel in Missoula. It’s one of the final jobs of the season.

“The work has definitely slowed,” Baer said. “But it generally slows down this time of year. We’ll see how it looks in the summer.”

Workman wasn’t so easygoing.

“I’m basically laid off,” he said, standing next to a still-wet concrete sidewalk. “I’m just finishing off a few things here, and then I’m done.”

Workman isn’t sure what he’ll do if the construction season fails to start next year—which seems likely, as housing permits have plunged. He remembers the wood products recession of 1981 very well. He had just moved to Montana.

“I went through the phonebook, looking to get work,” Workman said. Back then, he decided then to get out of building. He returned to school and earned a nursing degree, working as a nurse for 12 years. He didn’t much like it and got back into carpentry at the first opportunity.

What’ll he do now? Go back to nursing. He doesn’t want to, and won’t make any decisions soon.

“I’ve got a season pass at SnowBowl,” he said. “So I’m skiing this winter.”

As for next spring, he’ll take that hurdle when it gets here, he said.