What if your contractor goes bankrupt? How to protect yourself.

01Why it happens more often

A contractor going bankrupt is rarely a fraudster. More often it's a craftsman squeezed between rising costs and shrinking margins. The causes are structural.

Material costs

Between 2020 and 2025 the ABEX index, the reference for construction costs in Belgium, rose from 847 to 1,057 [5]. Insulation, shell, wood, steel: everything got more expensive.

Contractors who quoted a fixed price in 2022 for a project executed in 2024 were working with margins that had largely been consumed.

Labour shortage

Construction has the highest vacancy rate of any sector [3]. 91% of construction companies find recruitment difficult [4]. That drives up wage costs and slows down projects — a double cost for contractors already working on thin margins.

Falling demand

Order books have dropped sharply, the number of building permits fell, and significantly fewer new companies started in 2025 than the year before [2]. Less work, more competition, thinner margins.

The margin squeeze

Many contractors work with fixed-price contracts. Logical from your perspective as a homeowner: you want to know what you're paying. But if materials get 25% more expensive and wages rise, the contractor carries all the risk.

Some absorb that blow for one or two projects. After that, the margin is gone.

Knock-on to subcontractors

When a subcontractor goes bankrupt, it can pull the main contractor down with it. Work already invoiced to the homeowner but not yet paid to the subcontractor becomes an unrecoverable debt.

Your contractor may be financially healthy, but if his roofer or electrician drops out, it has direct consequences for your site.

02Spotting signals: before you sign

The best protection starts before you sign a contract. With the six checks you can run upfront, those checks cost 30 to 60 minutes per contractor, but can save you significant money.

No single signal is decisive. But several signals together are reason to dig further.

03Spotting signals: during your project

Even if your contractor looked financially healthy at the start, the situation can change. These are signals commonly reported in the sector.

If something feels off, ask the question. A good contractor takes your concern seriously.

04Protecting your project: the contract

A good contract isn't a sign of distrust. It's a framework that protects both parties.

Limit the advance to 30% maximum. The higher the advance, the greater your exposure in a bankruptcy. A serious contractor can work with 20 to 30%. More is rarely necessary.

Tie payments to milestones, not dates. Pay after the shell, after the roof, after the finishing. Not on the first of the month. That way you only pay for work actually done.

Include a retention clause of 5 to 10%. Hold back a percentage until final handover. This gives you a buffer for defects that only become visible later and motivates the contractor to finish the job.

Handle additional work in writing. Every change is recorded in writing with price and description, before the work begins. Additional work without written approval is in practice one of the most common sources of conflict on construction projects.

Record ownership of materials. Once materials are delivered and paid for, they are yours. Write this explicitly into the contract. In a bankruptcy the trustee can otherwise seize materials sitting on your site.

05Protecting your project: payment discipline

How you pay is at least as important as what's in your contract.

Pay only against invoices. No cash without an invoice, no transfer without documentation. Every payment must be traceable. In a bankruptcy, a payment without an invoice is practically unrecoverable.

Tie every payment to a concrete deliverable. Not "advance phase 2", but "kitchen finishing per quote ref. 2025-047, item 3.2". The more specific, the stronger your position.

Don't pay ahead on work that isn't done yet. It sounds obvious, but under pressure from a contractor who "needs to order the materials" many homeowners still pay upfront. Hold the line.

06Documentation as protection

In a bankruptcy you become a creditor. The strength of your claim depends directly on your documentation.

Well-documented homeowners are in a stronger position. Without documentation, your position is weak. A solid system for keeping your construction budget makes the difference.

Communicate in writing. Confirm every verbal agreement by email or message. "As discussed on site today: the tiles are delivered on 14 March and installed by 21 March." One sentence, five seconds, but it can make a difference of thousands of euros.

Take dated site photos. Photograph progress at least weekly. Modern smartphones automatically add date and location. In a dispute about the state of the works at the moment of bankruptcy, that documentation is especially valuable.

Have site reports signed. After every site visit with your architect: a short report of what was discussed, the state of affairs, and the next steps. Signed by all present.

Archive everything digitally. Quotes, contracts, invoices, emails, site reports, photos. All in one place, searchable and backed up.

07What if it happens anyway?

First steps

Your contractor has been declared bankrupt. These are the first steps.

Stop all payments. From the moment of bankruptcy, all payments are frozen. A payment you make now can be voided by the trustee.

Secure the site. Make sure materials and tools that are yours are protected. The trustee can seize anything on site unless you can prove it's your property.

Contact your architect. Ask for a standstill report: what is the current state of the works, what has been done, what hasn't, and what is the quality of the work delivered?

Notify your bank. If you have a construction loan, the bank needs to know the contractor is bankrupt. The bank can pause disbursement of further tranches until there's a solution.

Check your ABR/All Risks policy. An All Construction Risks policy covers damage to the building itself. Check whether your policy covers damage arising from stopping the works.

Legal process

After the bankruptcy, a trustee is appointed by the business court. The trustee manages the assets of the bankrupt company and distributes them among the creditors.

File your claim. You have a statutory deadline (usually 30 days after publication in the Belgian Official Journal) to file your claim with the trustee. This is the moment all your documentation becomes indispensable: invoices, proof of payment, the contract, photos of unfinished work.

Don't expect full repayment. In most bankruptcies, ordinary creditors (which is you) receive a limited percentage of their claim. The tax authority and NSSO come first. In practice you often recover 5 to 15%.

The ten-year liability outlives the bankruptcy. That insurance has been mandatory since 1 July 2018 [6]. The contractor's insurer remains liable after bankruptcy, within the limits of the policy [6]. If structural defects appear within ten years of handover, you can still turn to the insurer.

This is a simplified overview. Consult a lawyer for your specific situation.

Finding a new contractor

Have your architect draw up the state of play. Before a new contractor can start, it has to be clear what's already been done, what the quality is, and what still needs to happen.

Document everything before the new contractor begins. Photos, measurements, a detailed list of what's missing. The new contractor does not want to be responsible for the predecessor's mistakes. Rightly so.

Good documentation makes the handover feasible. The better your file, the faster and cheaper the handover. A new contractor who has to start blind will add a risk premium. A contractor who gets a complete file can quote precisely for what still needs to happen.

08The construction-loan complication

A construction loan makes a contractor bankruptcy extra complex. The bank pays in tranches, based on the progress of the works. If your contractor goes bankrupt halfway through a tranche, it gets complicated.

The money has been spent, but the work isn't finished. The bank released a tranche, you paid, but the contractor didn't fully deliver. The bank won't simply release the next tranche for a new contractor.

Work proactively with your bank. Inform your bank as soon as you spot signals. Banks have experience with this and can think along about solutions — but only if you loop them in on time.

Make sure tranches and invoices are aligned. Every bank tranche should be tied to a concrete, verifiable milestone. Not a vague "phase 2 done", but "shell ground floor and first floor completed, including lintels and precast floors".

The more concrete your documentation, the easier it is for the bank to work with you if a problem appears.

09The bigger picture: 2025 to 2028

This isn't a one-off. Over the past few years, the bankruptcy record in construction has broken again and again [1]. The structural causes — material costs, labour shortage, falling demand — don't disappear on their own.

According to the National Bank, residential investment only normalises towards the start of 2027 [1]. Until then, the sector stays under pressure.

Meanwhile, supply is shrinking. Fewer building permits, fewer starters, more companies disappearing than joining [2].

That means vetting your contractor is no longer optional. Check financial health before you sign, the way you'd check a Car-Pass when buying a used car.

A good contractor won't hold it against you that you do your homework. It shows you're a serious homeowner.