Summary of a Recent
Judicial Development in
Bankruptcy

Crop Disaster Payments Enacted Post-Petition
Are Not Property of the Estate

Jeffrey A. Peterson
National AgLaw Center Graduate Assistant

In In re Bracewell, 454 F.3d 1234 (11th Cir. 2006), debtor Ricky Bracewell ("Debtor") was a seed wheat and seed cotton farmer. See id. at 1236. In May of 2002 the Debtor filed a Chapter 12 bankruptcy petition that was converted to a Chapter 7 in January of 2003. See id. In February of 2003, the Agricultural Assistance Act of 2003, 16 U.S.C. §§ 3831-3832 ("Act"), was signed and provided the Debtor monetary relief for weather-related losses to his 2001 wheat and cotton crops ("Crop Disaster Payments"). See id. at 1236-37. While his Chapter 7 case was still pending the Debtor received $41,566. See id. at 1237. The bankruptcy court held the Crop Disaster Payments were property of the bankruptcy estate. See id. The federal district court reversed. See id. at 1247. The Eleventh Circuit affirmed the federal district court. See id.

11 U.S.C. § 541(a)(1) defines property of the bankruptcy estate as "all legal or equitable interests of the debtor in property as of the commencement of the case." Id. at 1237. The Eleventh Circuit noted that in In re Vote, 276 F.3d 1024 (8th Cir. 2002) and In re Burgess, 438 F.3d 493 (5th Cir. 2006) the Circuits held that

no legal or equitable interest exists until assistance legislation becomes law; before then the debtor has only a hope and maybe an expectation that legislation will be enacted for his relief, but that is not enough. Id. at 1239.

In the present case, the court held that until the legislation was enacted authorizing the disaster payments and specifying the criteria for those payments, the Debtor had no legal or equitable interest in the payment to qualify as "property of the estate" under § 541(a)(1). See id. at 1239.

The case was decided on June 30, 2006; this summary was posted Nov. 6, 2006.