In re Perkins

Case Type:
Case Status:
17-8001/8008; File Name: 18b0002p.06 (6th Circuit, Mar 13,2018) Published
Affirming, the Sixth Circuit BAP adopted the Sixth Circuit's chapter 13 standard for calculating debts for purposes of chapter 12 debt limits - reliance on the debtor's schedules, if they were filed in good faith. Second, income generated by the sale of non-debtor partnerships and S corporation which were owned and operated by the debtor was "farm income" for eligibility purposes. Finally, the Chapter 12 plan was feasible because a) testimony and prior years’ production supported income projections; b) oral leases of cropland were valid; and c) Till was a proper method to set interest rates.
Procedural context:
The bankruptcy court for the Western District of Kentucky found the debtor was eligible for relief under chapter 12 based on scheduled debts and the sources of her income, and also confirmed her chapter 12 plan over objections from the main secured lender. The secured lender appealed to the Sixth Circuit Bankruptcy Appellate Panel.
Debtor had been in farming since 1970 and at one time farmed about 9,500 acres with her son through partnerships. After her husband became ill, she retired as a teacher to care for her husband and the farm. The partnerships filed liquidating chapter 11 cases and the debtor ultimately filed chapter 12 in April, 2016 to protect her remaining 200 acre farm. Her schedules reflected total debts of $3,513,803, but as of the confirmation hearing, claims filed plus scheduled debts exceeded the chapter 12 aggregate debt limit. In the year prior to filing, the debtor had income of $279,000 from her farm; $764,472 from the farm partnerships; $161,571 of capital gains from equipment sales; and $132,360 from wages, pension and social security. BB&T, the main secured lender, argued that the debtor exceeded the chapter 12 debt limit, and that only income from operating her personal farm should count towards the requirement that more than 50% of gross income that must come from farming operations. The debtor's chapter 12 plan projected increased gross income based on crop selection, generating $184,000/year for secured creditors and $18,950/year for unsecured creditors, while a liquidation analysis indicated no distribution to unsecured creditors in a chapter 7. The debtor proposed amortizing BB&T's debt over 20 years at an annual interest rate of 4.5%. BB&T objected to plan feasibility, the treatment of its claims and argued the plan did not meet the best interest of creditors test. After a contested confirmation hearing, the bankruptcy court overruled BB&T's objections, found the debtor eligible for chapter 12 and confirmed the plan.
Delk, Harrison and Humphrey. Opinion by Humphrey

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