RE Can A Trust Be A Debtor?
Posted: Mon Feb 23, 2015 4:25 pm
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Mark is correct.
The trust you describe is not an entity; a trust [unlike a corporation] is not a person. A trust cannot file.
The actual party in interest is the successor trustee. At the death of the settlor the trust is irrevocable and the successor trustee is the legal owner; and the beneficiary is the owner in equity.
There is a 9th circuit case [Arizona law] that says a disclaimer of interest is not a transfer of a property interest under state law; therefore 548 does not apply. So the beneficiary can disclaim, but.
If the successor trustee/beneficiary disclaims; the successor trustee still has to deal with the foreclosure; until the trustee transfers title to the new beneficiary. Caution the successor trustee should give notice the trust has become irrevocable, wait 120 days for objections to the terms of the trust and then transfer the title. At which time the property is long gone. The successor trustee is a fiduciary and personal liability can attach if he improperly transfers property or loses the property in foreclosure that could have been avoided.
Are there any liquid assets in the trust to pay the arrears? The successor trustee has a duty to pay creditors. The beneficiaries can also advance cash to the trust to protect trust property. The beneficiary receiving the property should be motivated.
Injunctive relief in State Court probate; or bk by the beneficiary are options.
The irrevocable trust does need a tax EIN; usually applied for by the successor trustee; three minutes online to get one.
Best regards
Larry Webb
California Board of Legal Specialization
Certified Specialist in Bankruptcy Law
State Bar of California 229344
Central District California
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