when you file bankruptcy the attorney is the trust

A revocable trust is not protected in bankruptcy and the trustee can use those assets to satisfy creditors. Irrevocable Trusts When an estate planning lawyer sets up an irrevocable trust, the grantor loses the freedom to access, change, or cancel the trust.

Full Answer

Can I file bankruptcy if I have a trust?

However, bankruptcy cases tend are more complicated when a trust is involved. This is because the bankruptcy attorney will have to research the trust documents, Georgia trust and bankruptcy law, and federal trust and bankruptcy law before the case is filed. What is a trust?

Why does my bankruptcy attorney have to research my trust?

This is because the bankruptcy attorney will have to research the trust documents, Georgia trust and bankruptcy law, and federal trust and bankruptcy law before the case is filed. What is a trust?

How does bankruptcy affect trust assets?

How Does Bankruptcy Affect Trust Assets? It is possible that you find yourself in facing a mountain of debt and your only option is filing for bankruptcy, but you may also be the beneficiary of a trust. In many cases, the person filing bankruptcy can eliminate all of their debt, and still retain the benefits of the trust.

Why is the trustee’s interest not included in the bankruptcy?

The trustee’s interest isn’t included in the bankruptcy because he only controls the property; he can’t use it for himself. It wouldn’t be fair to the beneficiary if the trustee’s creditors could get the property in the trust.

How are trusts handled in bankruptcy?

If a beneficiary files for bankruptcy and has created a trust for his own benefit such as a revocable living trust, the bankruptcy court will simply ignore the revocable living trust much like the IRS ignores it for tax purposes. The assets will be considered to be held directly by the bankruptcy debtor.

Are trusts protected in bankruptcy?

A trust can protect your assets if you have to declare bankruptcy, depending on the type of trust you have. Assets in revocable living trusts can be seized by an individual's creditors if he or she files for Chapter 7 bankruptcy. Assets in an irrevocable trust cannot be seized.

When filing for bankruptcy What role does a trustee play?

A bankruptcy trustee is a person appointed by the United States Trustee, an officer of the Department of Justice, to represent a debtor's estate in a bankruptcy proceeding. Bankruptcy trustees evaluate and make recommendations about various debtor demands in accordance with the U.S. Bankruptcy Code.

What is a irrevocable trust?

What is an irrevocable trust? Simply put, it's one that cannot be changed once it has been agreed and signed. A revocable trust can become an irrevocable trust after the person making the trust dies – or after another specific date if that is put in writing.

What is Chapter 7 in a bankruptcy?

Chapter 7 provides relief to debtors regardless of the amount of debts owed or whether a debtor is solvent or insolvent. A Chapter 7 Trustee is appointed to convert the debtor's assets into cash for distribution among creditors.

Does the trustee monitor your bank account?

While your trustee will most likely periodically check all of your financial accounts such as your bank accounts, in order to ensure that you have enough money to continue making your bankruptcy payments, they are not permitted to touch any of your funds, other than the funds which are allocated for your secured loan ...

How much power does a bankruptcy trustee have?

The trustee in a Chapter 7 bankruptcy case does have lots of power. The trustee can hire an attorney to pursue claims. The trustee can hire an attorney to take depositions, issue subpoenas, and file lawsuits.

How does a bankruptcy trustee find hidden assets?

The bankruptcy trustees go about finding hidden assets by taking a close look at your debts, as well as doing public record searches, online analysis, tax returns, review reports from former spouses or friends, as well as payroll slips that may show deposits into banks or accounts that you have not listed in your ...

What does the trustee look for in Chapter 7?

The primary duty of the Chapter 7 trustee is to locate and sell assets for the benefit of your creditors. To do this, the bankruptcy trustee reviews the property listed in your bankruptcy paperwork, including "exempt" assets you claim you can keep by law.

What does a trustee do in Chapter 13?

The chapter 13 trustee both evaluates the case and serves as a disbursing agent, collecting payments from the debtor and making distributions to creditors. 11 U.S.C. § 1302(b). Filing the petition under chapter 13 "automatically stays" (stops) most collection actions against the debtor or the debtor's property.

What are the duties of a bankruptcy trustee quizlet?

The basic duty of the trustee is to collect the debtor's available estate and reduce it to cash for distribution, preserving the interest of both the debtor and the unsecured creditors.

What is the role of the bankruptcy trustee once the bankruptcy case has commenced what powers if any are afforded the trustee?

The Chapter 7 trustee becomes in legal possession of the debtor's assets until such time as the trustee later “abandons” those assets back to the debtor. A Chapter 7 trustee has both the duty and power to sell the debtor's assets and to take actions on behalf of the debtor's bankruptcy estate.

What happens to a trust in a bankruptcy?

When going through a bankruptcy, it is vital to determine who has control of the trust. When filing for bankruptcy, a trustee will be appointed to your case by the court and the trustee will be able to find assets that you own, like your house, car, banking accounts. The trustee can sell any of the assets that are considered to be non-exempt and pay the creditors with the money obtained from those sales. Determining the whether the trust is revocable or irrevocable is also important. If the trust is revocable, the beneficiary will not be able to immediately control those assets. For example, if the beneficiary is the one filing for bankruptcy, but the grantor has not passed, since in a revocable trust the grantor has the ability to alter the trust how they want, the trustee technically cannot pursue that trust. In any event, the Georgia bankruptcy exemptions also need to be considered in any bankruptcy case involving trust assets. See Georgia’s Statutory Bankruptcy Exemptions § 44-13-100.

What documents do bankruptcy attorneys need to research?

This is because the bankruptcy attorney will have to research the trust documents, Georgia trust and bankruptcy law, and federal trust and bankruptcy law before the case is filed.

What is irrevocable trust?

An irrevocable trust normally moves assets out of the grantors ownership and even out of the reach of probate or estate taxes. However, once made it cannot be altered in any way, not even by the grantor. Meaning that once any assets are placed in an irrevocable trust, ownership of the assets change from the grantor to the trust. The benefits to this are that since the assets are no longer under the ownership of the grantor, the grantor is relieved of any tax liabilities on any potential income produced by the assets in the trust. The assets in the trust may also be protected in case anyone brings legal judgment against the grantor.

Is a trust revocable or irrevocable?

For example, if the beneficiary is the one filing for bankruptcy, but the grantor has not passed, since in a revocable trust the grantor has the ability to alter ...

Can a trust file for bankruptcy in Georgia?

In any event, the Georgia bankruptcy exemptions also need to be considered in any bankruptcy case involving trust assets. See Georgia’s Statutory Bankruptcy Exemptions § 44-13-100. Georgia and Federal bankruptcy law allow certain trust beneficiaries to file for bankruptcy and still keep the trust intact, usually dependent on what kind ...

Can you file for bankruptcy if you have a trust?

In many cases, the person filing bankruptcy can eliminate all of their debt, and still retain the benefits of the trust. Filing for bankruptcy will help you in clearing most, if not all, of that debt completely away forever. However, bankruptcy cases tend are more complicated when a trust is involved. This is because the bankruptcy attorney will have to research the trust documents, Georgia trust and bankruptcy law, and federal trust and bankruptcy law before the case is filed.

Can a filer disclaim an inheritance?

Also, in the event of an inheritance, the filer could have also disclaimed the inheritance. While doing this will not allow the filer to benefit from the trust, it also prevents the grantor’s assets from going to a creditor. However, it is important to speak with an experienced bankruptcy attorney if you have done this.

What is a trust when you are alive?

A trust is created while you are alive and provides benefits during your lifetime and to your loved ones once you are gone. You are free to unwind the trust (if it’s revocable) or extract whatever assets you choose from the trust at any time.

Why put assets in a trust?

Putting assets in the trust makes them appear to no longer be yours personally but instead a part of the trust. It makes sense that many people would assume this provides protection from creditors and means debt collectors won’t be able to reach those “trust-owned” assets to collect on a debt.

Why are trusts important?

Trusts are popular in the asset protection industry and many promote them as a way to remove your name from your assets and prevent creditors from gaining access to them. But do they really change the rights afforded to creditors?

How to protect assets from creditors?

The important thing to remember is that there are no shortcuts and only limited ways to protect assets from creditors. The best thing you can do is work with an experienced bankruptcy attorney who understands exemptions and knows how to manage assets and risks when filing for bankruptc y. Trying to manipulate or outsmart the system will likely do nothing more than getting you in trouble. This doesn’t mean that trusts aren’t a valuable asset planning tool. It just means you shouldn’t try to use them to trick creditors.

Is an irrevocable trust a revocable trust?

Irrevocable trusts are different than revocable trusts, but not as much as you might want them to when it comes to protecting assets from creditors.

Can a trust be revoked?

But the truth is the trust changes nothing in terms of your exposure to creditors. If the trust is revocable and you have the power to revoke it in any way, the assets in the trust are subject to creditor’s claims. When you complete your bankruptcy paperwork you’ll need to list the assets in the trust just as you would any other asset.

Is bankruptcy a good option for seniors?

Bankruptcy can be one of the most powerful tools available to help seniors deal with financial problems. Many Tampa Bay...

What is irrevocable trust?

An irrevocable trust means the trust cannot be changed, and the assets in the trust cannot be accessed, without permission from the beneficiaries. This is because the grantor of the trust has given up their rights of ownership of the assets in the trust. The beneficiaries may not be able to access a trust instantly, but because the grantor has removed their ownership rights, the beneficiaries of the trust have some legal rights to those assets.

What is the main concern with trust funds?

The main concern with trust funds is whether or not the trust can be protected from creditors. There are many allowances that will let you protect a trust. One of the most common allowances in the legal field is a “spendthrift” clause. A spendthrift clause can limit creditor’s claims to trust assets, regardless of whether the trust is revocable or irrevocable.

What are the different types of trusts?

There are two different types of trusts. There is a revocable trust and an irrevocable trust. A revocable trust is when the grantor (the person who created the trust and put property into it) of the trust has full access and control over the trust and at any given time can access the property in the trust. This is true only until the passing of the grantor. The beneficiary of the trust (the person that will receive the trust) is not able to control the assets of the trust until the grantor of the trust is deceased. Even then, the beneficiary may not have full control over what happens to the trust. This is due to there being provisions and rules associated with the trust that may limit what the beneficiary can do with the trust and the assets in the trust.

Can a trust fund file for bankruptcy?

To answer this question, yes; generally speaking, someone with a trust fund is more than likely able to file bankruptcy.

How long can a trustee look back on a bankruptcy?

In a bankruptcy, the trustee can void most transfers made within 90 days and some made within one year as a preferential payment. In addition, a transfer of property to deter, hinder or defraud a creditor can be a fraudulent transfer and the trustee can look back 2 years and 10 years for a self-settled trust.

What happens if you file for bankruptcy?

When an individual files for bankruptcy, the bankruptcy court will assign a trustee who will oversee all of your assets and may be able to take those assets which are not ...

What happens when an estate planning lawyer sets up an irrevocable trust?

When an estate planning lawyer sets up an irrevocable trust, the grantor loses the freedom to access, change, or cancel the trust. When the grantor places assets into the trust, they are withdrawing any rights of ownership of those assets. They are required to name a trustee for the trust.

What assets are exempt from bankruptcy?

Assets which are exempt from bankruptcy and are protected from the trustee may include the filer’s primary residence, retirement savings accounts, and their personal vehicle. This may include any trusts you have set up. How those trusts are set up is critical to whether or not they are protected.

What is a revocable trust?

With a revocable trust, the individual setting it up maintains complete control over the trust. They are referred to as the grantor.

Do you have to name a trustee for an irrevocable trust?

They are required to name a trustee for the trust. And although the beneficiary may not able to access the assets in the trust, they are considered the legal owner of those assets. Although the grantor has given up the flexibility that a revocable trust offers, what they gain with an irrevocable trust is protection.

Can a grantor change a trust?

The grantor can change the trust, add or remove assets from the trust, or revoke the trust any time they want. The beneficiary has no say at all until they actually inherit the trust. A revocable trust is not protected in bankruptcy and the trustee can use those assets to satisfy creditors.

What to do if a trustee has debt?

Trustees with a trust that has debt issues should speak to a lawyer who understands trusts and bankruptcy for assistance in working out a plan. Settling outstanding debts for a trust can be complicated. As a trustee, you are responsible for the trust and can be held liable for poor judgment. Talking with an attorney is your first step to protecting the trust.

Can a trust file for bankruptcy?

So, it is possible that a trust could file for bankruptcy protection, but the type of bankruptcy would be similar to a business bankruptcy versus what an individual would file. Both a person and a business can file a chapter 7 liquidation bankruptcy. However, in the case of a trust, this would only work to liquate the trust in a way that would most likely not be beneficial to the trust. A person can have debts forgiven, and still retain a portion of their assets. A trust would not be granted this same types of protections. The trust does not get to retain assets when it has debts like a person can.

Can a revocable trust go bankrupt?

This type of trust cannot declare bankruptcy as the Owner/Trustee/Beneficiary would have to declare bankruptcy.

Is it possible for a Trust to declare Bankruptcy?

I was asked this question last week, and as with almost every question asked of an attorney the answer was, “It depends.” A trust is normally used to pass wealth or property with less court oversite and litigation while allowing people to main some control of their assets after they pass. There are types of living trusts that are also used such as Real Estate Investment Trusts (REITs) or Gun Trusts that are also set up for different reasons they do have many of the same general functions when related to declaring bankruptcy. I could go into the numerous types of trusts and their specifics, but in relation to declaring bankruptcy, the answer depends on whether the trust is acting like a piggy bank or is it a business. There is no real place when creating a trust to declare whether it will only be acting like a Safe Deposit Box/Piggy Bank in only holding items, or if it is going to act as an ongoing business creating and generating income.

What happens to the assets in bankruptcy?

During the bankruptcy, the trustee generally gathers all of the consumer’s assets and determines which ones qualify for liquidation and once liquidated, the proceeds go to pay off the consumer’s creditors. However, determining which assets qualify for liquidation can be a complicated process. The expansive language of the Bankruptcy Code attempts ...

What is the danger of a trustee in Chapter 7?

In a Chapter 7 [1] Long Island bankruptcy, known as liquidation bankruptcy, consumers are able to erase certain debt and start over on a fresh financial footing. During the bankruptcy, the trustee generally gathers all of the consumer’s assets and determines which ones qualify for liquidation ...

What is irrevocable trust?

An irrevocable trust [4] is one that cannot be modified or terminated without the permission of the beneficiary. The grantor effectively removes all of his rights of ownership to the assets of the trust after transferring the assets into a trust.

What type of trust is the most common?

The most common and basic type of trust is a revocable trust. Most revocable trusts give an individual a great deal of control and access to the assets inside the trust until their death.

Can a revocable trust be liquidated?

With a revocable trust, the trust beneficiary does not have any legal claim to the trust assets. Usually, therefore, a revocable trust is not considered an asset that a consumer controls or can be acquired and liquidated by a trustee in a Chapter 7 bankruptcy proceeding . This situation is more complicated when the individual filing ...

Can a trust beneficiary file for bankruptcy?

Trust Beneficiary Files for Bankruptcy. When the trust beneficiary and the individual filing for bankruptcy protection is the same person, the individual has control over the trust as they are acting in the capacity of the trust grantor. Because they have control over the trust and the assets held in the trust, ...

Can you liquidate an irrevocable trust in bankruptcy?

If there are multiple beneficiaries of an irrevocable trust, there may also be problems with liquidating the trust in a Chapter 7 bankruptcy. Another way to avoid problems is to disclaim any interest in a trust, thereby forever waiving any right to reclaim any of the trust’s assets.