Bradley v. Ingalls (In Re Bradley)

DENNIS, Circuit Judge:

Our main concern in this bankruptcy appeal is whether the burdens and ele ments of proof were correctly applied in a bankruptcy trustee’s action to trace and recover assets that a debtor “self-settled” into a spendthrift trust of which he is the beneficiary. The bankruptcy and district courts held that, although the debtor and his business associates used the trust in a scheme to defraud his creditors, the trust could not be declared a sham because under Texas law the doctrine of sham or illusory trust applies only in marital litigation. Instead, those courts held that…