If the borrower files for bankruptcy in a trust deed investment, the trustee typically files a claim in the bankruptcy proceeding to protect the interests of the investors. Depending on the type of bankruptcy filed, there may be a temporary delay in receiving payments, but the trustee will work to ensure that the investors receive their share of the proceeds from the sale of the property.

In a Chapter 7 bankruptcy, the property is usually sold to pay off the borrower’s debts, and the investors will receive their share of the proceeds. In a Chapter 11 bankruptcy, the borrower may have the opportunity to restructure their debt, and the trustee will work to ensure that the investors receive the payments due to them under the terms of the trust deed.

It’s important to note that the exact process can vary depending on the specifics of the case and the laws of the state in which the property is located.