Can a produce debtor discharge a PACA trust claim in bankruptcy?
Yes – unless you act to prevent it very early in the case. The bankruptcy code provides that debts which result from fraud or defalcation while acting in a fiduciary capacity are not dischargeable in bankruptcy. Courts have held that the failure to maintain trust assets constitutes defalcation and the debt is not dischargeable. Accordingly the bankruptcy will have no effect on your claim – but only if you properly file the necessary documents to prevent the claim from being discharged.
