Content area
Full Text
Dating back at least to 1 867, bankruptcy courts have broadly classified what property belongs to the bankruptcy estate.1 Section 541 of the Bankruptcy Code states that upon the filing of a bankruptcy petition, all of a debtor's legal and equitable interests become property of the bankruptcy estate.2 However, there are situations "where property ostensibly belonging to the debtor will actually not be property of the debtor, but will be held in trust for another."3
Unlike an express trust, even when no formal documents have been executed, a court may impose a trust resulting from the intentions of the parties.4 A resulting trust is defined as "a trust imposed by law when property is transferred under circumstances suggesting that the transferor did not intend for the transferee to have the beneficial interest in the property."5 A resulting trust is commonly referred to as "bare legal title," in which a debtor claims that he or she has no equitable interest in the property but a legal interest only. Whether property that is owned legally by the debtor, in which the debtor claims no equitable interest, is property of the estate is determined by the facts and circumstances of the case and the intent of the parties when they created the interest.6
Another type of implied trust is a constructive trust. However, "a constructive trust is imposed where a person holding title to property is subject to an equitable duty to convey it to another on the ground that he would be unjustly enriched if he were permitted to retain it."7
Section 541(d) limits what can be characterized as property of the estate: "Property in which the debtor holds... only legal title and not an equitable interest... becomes property of the estate.. .only to the extent of the debtor's legal title to such property, but not to the extent of any equitable interest in such property that the debtor does not hold."8
The question of whether property is property of the estate, and subject to administration by a trustee, arises frequently in bankruptcy court. The evidence required to impose a resulting trust must be "strong, clear and convincing as to leave no doubt as to the existence of the trust."9 The most common scenario in which...