Yes, you read that right -- you could be out of luck even if all goes according to plan, and you've paid for everything in full. If you can't cover your contractor's monetary malfeasance, you could lose your home. Say that you paid to extend your living room by 500 square feet. You're technically responsible for the payment of all goods and services, from the lumber supplier who provided the wood to the carpenter who did the work. Any of these parties can file a lien against your home if your contractor neglects to pay them. And if you don't have the money, the state holds the right to sell your house at auction to cover those debts.
So, how can you avoid losing your home to stiffed subcontractors? Instead of paying your principal handyman in several large payments, write numerous smaller checks to the contractor, supplier and subcontractor providing the goods or services. You should also touch base with all parties before making the final payment, just to make sure they've been paid in full and have no grievances with your contractor.