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Trust Funds in Bankruptcy

One concern that some personal bankruptcy filers have is whether their trust fund or other assets will be protected in bankruptcy court. Trust funds come in many shapes and sizes, so to speak, and the laws that govern them are appropriately complex and vary by state.

To get an idea of which of these laws apply in your case, you may want to speak with a bankruptcy lawyer practicing near you.

Creditors and Trust Funds when Filing Bankruptcy

Here's a look at some of the basic considerations about trust funds in bankruptcy.

  • Type of bankruptcy: One factor that will influence whether the court can go after your trust fund is what type of bankruptcy you choose to file, Chapter 7 or Chapter 13. In Chapter 13 bankruptcy, filers repay many of their debts in a three- to five-year repayment plan. In Chapter 7 bankruptcy, though, filers receive a full discharge of eligible unsecured debts and do not have to make repayments over a period of time.
  • State laws and exemptions: Another important factor is your state of residence. In Chapter 7 bankruptcy, certain assets are protected from the court, meaning that the court cannot go after them in a bankruptcy case. Each state determines whether certain assets will be protected, and up to what value. Some states count educational trust funds and public benefit trust funds among their exempted property.
  • Type of trust fund: Yet another consideration is what kind of trust fund you have. Money set aside as part of inheritance may be treated differently than money set aside as part of employee benefits; money saved specifically for one purpose (e.g. paying for future education) may be treated differently still.

Learn More about Your Trust Fund in Bankruptcy

Deciding whether or not to file for bankruptcy requires careful consideration of the specifics of your case and the laws that govern trust funds where you live. In order to get the information you need to make this kind of decision, as well as an examination of your specific financial situation, you may want to speak directly with a bankruptcy lawyer practicing in your state. Connecting with an attorney is easy - just use the case review form on this page to get started now.

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