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Maverick
Maverick, Attorney
Category: Bankruptcy Law
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Experience:  20 years of professional experience
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My mom had her debts discharged in a chapter 7 bankruptcy.

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My mom had her debts discharged in a chapter 7 bankruptcy. In her living trust she asked that her creditors be paid off. She specifically listed some of the creditors who were discharged in the bankruptcy. Can or should the trustee payoff these creditors since they are legally not creditors? Or is my mother's intent to pay them, notwithstanding the use of the term, "creditors" controlling?

These debts were never reaffirmed by the bankruptcy court. It is unclear if the creditors approached my mom about repayment. The creditors will claim that my mom told the creditors that they would be paid off when she died (because of an insurance policy).

Thanks in advance.

Welcome to Just Answer! My name isXXXXX very much enjoy what I do and I hope that you will benefit from this information.

 

The discharge is a permanent order prohibiting the creditors from taking any form of collection action on discharged debts, including legal action and communications with the debtor, such as telephone calls, letters, and personal contacts.

 

However, a debtor who has received a discharge may voluntarily repay any discharged debt. A debtor may repay a discharged debt even though it can no longer be legally enforced. Sometimes a debtor agrees to repay a debt because the debtor's reputation is important.

 

Unfortunately, the trustee is going to be under a fiduciary duty to carry out the terms of the trust.

 

 

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Customer: replied 6 years ago.
Key Points

1) A deceased person may instruct the trustee (or executor) of his or her trust (or estate) to payoff a debt discharged in bankruptcy even though repayment of the discharged debt is voluntary. In other words, it is not voluntary for the trustee to make the payment, but mandatory based upon the deceased person's intent.

2) If a discharged creditor approached the person after the bankruptcy and inquired about payment of the debt, then the promise to repay the debt may have been improperly entered into and may not be valid depending upon the specific fact pattern.

1. without giving effect to the term mandatory, this is correct as the trustee has to follow the wishes of the grantor as per the terms of the trust or else he will be said to have breached his fiduciary duty.

 

2. this is correct. If you can show that the creditors communicated with the debtor about the debt after discharge and tried her to get her to repay it, then you may be able to have the BK court hold the creditor in contempt of the discharge injunction and ask the court to issue an order that exempts the trustee from paying them per the trust terms.

 

 

 

 

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