When someone is found to have breached a duty, a large judgment can be rendered against them. If they can't afford to pay the judgment, they can file for bankruptcy and ask that the judgment be discharged meaning that they don't have to pay it. There are some exceptions to this when dealing with fiduciaries. The bankruptcy code specifically prohibits the discharge of a judgment if the judgment is for breach of fiduciary duty. In March, 2013, the Supreme Court of the United States was asked to interpret that provision of the bankruptcy code. In the case before the court, a brother had breached his fiduciary duty as found by a state court but all the monies had been paid back into the trust and the brother did not breach is duty intentionally or with knowledge that his actions were a breach of his duties. The Supreme Court held that in order to deny a discharge of a fiduciary, the judgment must be related to intentional bad conduct by the fiduciary. They held that in the case before it, since the brother did not intentionally breach his duty, the money had been repaid and there was no malice involved, the judgment against him for breach of his fiduciary duty could be discharged in bankruptcy. No. 11-1518.
Copyright by Robert Ray a Texas inheritance attorney.
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This page is general information about Texas law. It is not legal advice about your situation, and reading it does not create an attorney–client relationship. These matters turn heavily on specific facts and specific dates, and the law has exceptions this page does not cover. You should not take, or refrain from taking, any action based on this page. Discuss your circumstances with an attorney who can advise you on them.