A couple who were no longer farming and did not intend to farm in the future nonetheless qualified as “family farmers” eligible for reorganization under chapter 12.
A husband and wife last engaged in farming about two years before they filed a chapter 12 petition. Even then, they rented land in another state where their son did the farming. They testified at the Section 341 meeting that they did not intend to farm in the future.
The trustee filed a motion to dismiss, alleging that the couple were not eligible under the family farmer definitions contained in Section 101(18) and 101(19). Bankruptcy Judge Joan A. Lloyd of Louisville, Ky., denied the motion.
The facts saved the couple from dismissal. On the land farmed by their son, the couple rented the property in their own names. They owned the farm equipment; purchased the seeds, insurance and other materials; decided what to plant; and incurred all profits and losses.
Judge Lloyd noted that Section 1222(a)(8) allows a farmer to liquidate in chapter 12. She said it would make “little sense” to bar the use of chapter 12 “simply because the debtors made a reasonable financial decision to end a nonprofitable farming operation.”
Although Section 101(19) requires “stable and regular income” as a condition to relief in chapter 12, the judge mentioned how the statute does not require that payments under a plan be “farming generated.”
Judge Lloyd said that more than half of the debtors’ income in 2012 and 2013 was derived from farming, thus satisfying the 50% threshold required by Section 101(18). She did not mention the couple’s farming income from 2014 or 2015, when they filed their chapter 12 petition.