Summary of a Recent
Judicial Development in
Bankruptcy

Right to Crop Disaster Payment Is Property
of Bankruptcy Estate

Joshua T. Crain
National AgLaw Center Graduate Assistant

Summary of Decision

In In re Bracewell, 310 B.R. 472 (Bankr. M.D. Ga. 2004), the United States Bankruptcy Court for the Middle District of Georgia held that a crop disaster payment was part of a debtor's bankruptcy estate under 11 U.S.C. § 541(a)(1).

Background

Debtor Ricky W. Bracewell planted approximately 597 acres of wheat and cotton in 2000 and 2001. See id. During 2001, the debtor's crops were damaged by drought conditions which caused the debtor to experience reduced yields. See id. Because of the low yields the debtor was unable to repay operating loans and ultimately filed a Chapter 12 bankruptcy petition on May 29, 2002. See id. On January 2, 2003, the case was converted to Chapter 7. See id. On February 20, 2003, the Agricultural Assistance Act of 2003 was signed into law, providing disaster payments to farmers who suffered from a weather-related disaster in 2001 or 2002. See id. The debtor applied for the disaster payments on January 30, 2004. See id.

Arguments

The trustee argued that the payment received by debtor as a result of his losses in the 2001 crop year was property of the bankruptcy estate under 11 U.S.C. § 541(a)(6). See id. The trustee argued that the disaster payment was property of the estate as proceeds of the pre-petition crops. See id. The debtor argued, however, that the disaster payment was not part of the bankruptcy estate because his right to the payment did not exist until after he had filed bankruptcy and converted his case to Chapter 7. See id.

Analysis and Holdings

The court explained that the disaster payment was directly related to the pre-petition crop that the debtor had planted, harvested, and sold before filing for bankruptcy. See id. It also explained that the crop could not, therefore, be property of the estate. See id. The court stated, however, that the debtor's right to the disaster payment was part of the estate. See id. The court explained that "[u]pon the occurrence of the disaster,. . . [debtor] had the right to collect disaster payments from the government, if such legislation was passed." Id. at 477. The court explained that the debtor had the right to the disaster payment based on the 2001 crop. See id. The court therefore held that the disaster payment was part of the bankruptcy estate under 11 U.S.C. § 541(a)(1). See id.

The case was decided on May 20, 2004; this summary was posted Dec. 22, 2004.