A bankruptcy trust is a financial arrangement set up to manage and distribute funds to creditors when a company goes bankrupt. These trusts are often created during the bankruptcy process to ensure that the assets of the company are handled fairly and efficiently. They help protect the interests of creditors by providing a structured way to pay off debts. Typically, a bankruptcy trust is funded with money or assets from the bankrupt entity. Once established, it is managed by a trustee who oversees the distribution of funds according to the terms set out in the trust agreement. This process helps streamline the resolution of claims and can provide some recovery for creditors.