Any time divergent areas of the law intersect within a bankruptcy proceeding, the possibility of an unexpected outcome substantially increases. Such a case was evidenced by an unusual order recently entered in In re Mrozik, No. 08-12533 (Bankr. N.D. Cal. Apr. 18, 2014), which permitted a Chapter 7 trustee to keep open a bankruptcy to await the death of the holder of a life estate so that the creditors of the remainderman could recover from the proceeds of the remainder interest upon termination of the life estate.
The debtor in this case, Peter Mrozik, filed his Chapter 7 petition Nov. 26, 2008. Jeffry Locke was appointed as bankruptcy trustee. Mrozik scheduled a contingent interest in 50 percent of a testamentary trust created by his father, which became part of the bankruptcy estate. A significant portion, if not all, of the trust’s assets consisted of a 50 percent interest in a single parcel of residential real estate. The other half was owned by Mrozik’s 80-year-old stepmother, who was also the sole beneficiary of the trust during her lifetime. The debtor was not entitled to any distributions from the trust until his stepmother died.
