Escrowed funds do not belong to the party holding them in escrow. They are supposed to be held in trust in a separate account other than the TC's operating account. If the TC goes under it should not affect the escrowed funds. If there is a shortage in the escrow account when a TC goes under it might be wise to have a word with the law enforcement authorities.

In the case of law firms holding escrowed funds many states such as Connecticut have client security funds from which shortages can be repaid. TC's may or may not have a similar arrangement depending upon the law of the applicable state. It would be best to consult the licensing authority of the state in which the TC is located.

I recently had an amusing experience with a closing. I had been hired by a signing service to perform the closing. Payment of my fee was due within 30 days. On day 31 I received a call from the signing service begging me to reduce my fee because their client had not paid them in full. This was a little ridiculous since my services had been fully performed and accepted. I explained that I found the story difficult to believe since the signing service and its fee were listed on the HUD1 form,  and  these funds were scheduled  for distribution  after the expiration of three days from the closing date. Those funds were supposed to be held in escrow, and if the signing service was not paid in full...there was a serious problem with accountability for those funds. Needless to say my full fee was paid within a matter of days.