Opinion
Bankruptcy Case No. 01-60522
August 16, 2001
OPINION
This matter having come before the Court on Debtors' Motion for Reconsideration and Response to Debtors' Motion for Reconsideration filed by Farm Credit Services of Southeastern Illinois, FLCA and Farm Credit Services of Southeastern Illinois, PCA; the Court, having heard arguments of counsel and being otherwise fully advised in the premises, makes the following findings of fact and conclusions of law pursuant to Rule 7052 of the Federal Rules of Bankruptcy Procedure.
Creditor, Farm Credit Services, moved to dismiss this case on the ground that the Debtors were not family farmers, as defined by 11 U.S.C. § 101(18). On June 28, 2001, the Court entered an Opinion and Order allowing the Motion to Dismiss, finding that the Debtors had failed to establish that 80% of their gross income during the tax year 2000 was derived from a farming operation owned or operated by the Debtors. A review of the Opinion and Order of June 28, 2001, reveals that the Court applied the wrong legal standard in that the 80% of income test pursuant to 11 U.S.C. § 101(20) is not the appropriate test. Rather, the appropriate test to be applied is found under 11 U.S.C. § 101(18), which states:
(18) "family farmer" means —
(A) individual or individual and spouse engaged in a farming operation whose aggregate debts do not exceed $1,500,000 and not less than 80 percent of whose aggregate noncontingent, liquidated debts (excluding a debt for the principal residence of such individual or such individual and spouse unless such debt arises out of a farming operation), on the date the case is filed, arise out of a farming operation owned or operated by such individual or individual and spouse, and such individual or such individual and spouse receive from such farming operation more than 50 percent of such individual's or such individual and spouse's gross income for the taxable year preceding the taxable year in which the case concerning such individual or such individual and spouse was filed;
In support of their Motion for Reconsideration, the Debtors assert that they did, in fact, have gross income arising out of a farming operation, in the tax year 2000, which exceeded 50% of their gross income. Debtors assert that, not only did they have gross income on a personal level, but they also had a gross income from a farming partnership which should be added to their personal income such that they meet the 50% test as prescribed under 11 U.S.C. § 101(18). The Debtors cite the case of In re Lamb, 209 B.R. 759 (Bankr.M.D.Ga. 1997), for the proposition that the Debtors' gross income should include their distributive share of the gross income of their partnership. Additionally, the Debtors cite the cases of In re Shepherd, 75 B.R. 501 (Bankr.N.D.Ohio 1987) and In re Smith, 109 B.R. 241 (Bankr.W.D.Ky. 1989) for the proposition that gross farm income from a partnership should be included to determine whether the Debtors meet the 50% gross income test as prescribed in § 101(18).
Following a close review of the Debtors' tax returns for the taxable year 2000 and the cases cited by the Debtors in support of their position, the Court concludes that the Debtors have established that they meet the 50% of gross income test as prescribed under 11 U.S.C. § 101(18). The Court finds that there is ample authority for the proposition that the gross income derived by the Debtors from their farming partnership should be included in their gross income for the tax year 2000, for purposes of applying the test to determine whether the Debtors are family farmers. Thus, the Court concludes that the Debtors' Motion for Reconsideration filed on July 6, 2001, should be allowed, and that the Debtors should be permitted to reinstate their Chapter 12 status and proceed to file a Chapter 12 Plan of Reorganization.
ORDER
For the reasons set forth in an Opinion entered on the ___ day of August 2001;
IT IS HEREBY ORDERED that:
A. Debtors' Motion for Reconsideration, filed on July 6, 2001, is ALLOWED;
B. Debtors are further allowed to proceed as family farmers under Chapter 12 of the Bankruptcy Code; and,
C. Debtors are directed to file their Chapter 12 Plan of Reorganization within 21 days of the date of this Order.