Updated: Jun 16
Bankruptcy is complicated, and trusts are complicated. When the two mix, it is a recipe for disaster for those without legal representation. At Fiffik Law Group, we believe in providing access to justice for all, and believe that nobody should have to go at it alone. When a bankruptcy court unjustifiably went after a Beaver County, Pennsylvania man who had already declared that he had nothing, Fiffik Law Group Attorney Matthew Bole came to his defense. He prevented over $70,000 from being collected while also managing to save everyone involved from going through an expensive trial.
When someone files for bankruptcy, the bankruptcy court assigns a trustee to oversee the debtor’s estate. This trustee is essentially a manager who ensures that the entities the debtor owes money to are represented and considered. He or she confirms that all paperwork is accurate and complete, there are no undervalued assets or undisclosed income, no property has been fraudulently transferred, etc. The trustee then makes recommendations to the court based on his or her findings. In this case, the trustee found out that the person who filed for bankruptcy was a beneficiary of a trust, so they filed an Adversary Proceeding in an attempt to collect over $70,000 from the trust.
A trust is a fiduciary agreement that is part of an estate plan, typically used to hold assets for beneficiaries and ensure they are distributed according to the trustor’s wishes.
An Adversary Proceeding in Bankruptcy Court is a separate lawsuit as a result of a complaint filed.
Attorney Bole successfully defended against the bankruptcy trustee’s complaint. This trust was specifically written so that if a beneficiary filed for bankruptcy, the trustee of the trust was no longer required to pay income to the beneficiary. This portion of the trust is known as a spendthrift provision, which is designed to protect the beneficiaries of the trust against themselves and their creditors. This means that in cases like this where the beneficiary files for bankruptcy, it makes things much more difficult on the creditors to collect from the trust
After Attorney Bole presented his defenses, including the spendthrift provision, the bankruptcy trustee voluntarily withdrew its complaint, and the case was dismissed. Attorney Bole not only saved the trust’s beneficiaries $70,000, but also the additional attorney fees they would have incurred if the case had gone to trial.
This is one of many examples of how complex trust administration can be and why it is so important to have a properly drafted trust and for the trustee to have experienced representation. The experienced attorneys at Fiffik Law Group can help you handle any issues that arise in the drafting and administration of your trust. We will help you understand the sometimes confusing and complex language of the trust (like the spendthrift provision) and ensure the intent of the trust is followed – whether that is maximizing the amount of money that stays inside of it or otherwise. Contact us today for a free initial consultation.