In Re Ronald L. JORDAN, Debra L. Jordan, Debtors. Karen L. HERRIN, Trustee, Appellant, v. Ronald L. JORDAN, Debra L. Jordan, Appellees

Karen Herrin, the trustee in bankruptcy, appeals from the Bankruptcy Appellate Panel’s (BAP’s) judgment affirming the bankruptcy court’s grant of summary judgment in favor of the debtors Ronald and Debra Jordan.

We must decide whether a trust containing restrictions against assignment and alienation, created to compensate a debtor for the release of his personal injury claim, is a spendthrift trust under Washington law and is, therefore, excludable from his estate pursuant to 11 U.S.C. § 541 (c)(2). The BAP affirmed the Bankruptcy Court’s judgment that the trust created to settle Ronald Jordan’s personal injury claim against his employer, Burlington Northern Railroad (BN), should be excluded from the bankruptcy estate because it was a valid spendthrift trust. In re Jordan, 96 B.R. 284, 287 (9th Cir. BAP 1989). We conclude that the fund created by the settlement and release is not a spendthrift trust under Washington law and reverse.

I

Ronald Jordan, while employed as a signal maintainer by BN was injured on December 26, 1984 in an on-the-job accident. As a result, his left leg was amputated six inches below the knee.

On April 2, 1985, Ronald Jordan entered into a structured…