Summary of a Recent
Judicial Development in
Bankruptcy

Definition of "Farming Operation"
Includes the Breeding, Raising and
Sale of Horses

Jeffrey A. Peterson
National AgLaw Center Graduate Assistant

In In re Buchanan, No. 2:05-0114, 2006 WL 2090213 (M.D. Tenn. Jul. 25, 2006), James B. Buchanan and Karen D. Buchanan ("Debtors") bred, boarded and sold walking horses. See id. at 1. The court stated that:

[e]ighty percent (80%) of [the debtor husband]'s workday involves training horses and [the debtor wife] spent 50% of her time on the debtors' operation. Eighty percent (80%) of the Debtors' gross income for the years immediately preceding the filing of the bankruptcy petition was from the "boarding/training" portion of their horse business. Id.

The Debtors filed a Chapter 12 bankruptcy petition. See id. The bankruptcy court found that the Debtors were engaged in a "farming operation" as defined by 11 U.S.C. § 101(21). See id. at *3. 11 U.S.C. § 101(21) provides that a "‘farming operation' includes farming, tillage of the soil, dairy farming, ranching, production or raising of crops, poultry, or livestock, and production of poultry or livestock products in an unmanufactured state." Id.

The district court affirmed the bankruptcy court decision. Id. It applied the "totality of circumstances" and held that the Debtors have the same types of risks as do other agricultural business, and the debtors' business was regulated by the Department of Agriculture. See id. at *3-5.

The case was decided on July 25, 2006; this summary was posted Nov. 6, 2006.