Legal Tip: Arguing a Trust on Bankruptcy When a person goes bankrupt what they own legally may not be what they own beneficially. In a recent case, it was successfully argued that a trust relationship existed, where there was no formal trust set up, and this prevented a property falling into the hands of creditors. Background of the case Lebanese migrants, mum, and dad, purchased a house in Sydney. At a later date son needed to borrow some money but could not do so on his own so mum and dad took out a loan on their home and let the son use the money. The son made the payments on the loan – for a while. The son stopped paying and mum and dad could not keep up the payments so they fell behind. Eventually, the bank was going to take possession of the house as they could not refinance on their income and repayment history. It was suggested that the adult daughter would be able to get a loan and that the daughter could 'buy' the property from them. This suggestion seems to have come from a bank 'broker'. The daughter ended up buying the house from them. The title was transferred into her name and mum and dad and the family members continued paying the loan. All went well for a while until the daughter committed criminal fraud against an insurance company she worked for and was sued as well as charged with criminal offences. The daughter then suffered a court judgement as she owed the insurance company over $200,000. She went bankrupt as she could not pay the debt. Later when the creditors tried to take the house it was argued that the house actually belonged to the parents and the daughter were merely the trustee owner for them. The court agreed and ordered that the title to the property be transferred back to the parents and that this property be charged to the parents to the value of their payments plus interest. So the trustee in bankruptcy may have claimed back a small amount of the value of the property – the value less the parent’s contributions plus interest. Tamer v Official Trustee in Bankruptcy  NSWSC 680 Tamer v Official Trustee in Bankruptcy - NSW Caselaw Moral of the story - title doesn't always show beneficial ownership.