## Facts

- Randy and Geneva Perkins filed a Chapter 12 case in 2013.
- Randy operated a cattle operation on leased land; he cared daily for 262 head of cattle owned by Diamond Feeders, LLC, and also cared for about 37 head of his own cattle on the same farm.
- Diamond Feeders paid Randy for the daily care and feeding of its cattle.
- Geneva worked as a secretary, and the household also received Social Security benefits.
- The Perkinses’ 2010 and 2011 tax returns showed that cattle-related income (including the custom cattle-feeding arrangement and their own cattle activity) exceeded one-half of their gross income.
- Farm Credit Mid-America, PCA filed proofs of claim totaling about $208,578.02 based on loans secured by the Perkinses’ real property, farm equipment, and cattle.
- The Perkinses’ Second Amended Chapter 12 plan proposed to pay Farm Credit with semiannual payments of $12,970.02, amortized over 10 years at 4.5% interest, followed by a balloon payment of roughly $124,000 in 2018.
- The plan provided that Farm Credit would retain its existing liens, but it did not offer additional collateral.
- The Perkinses proposed funding plan payments from cattle-related income, Social Security benefits, and Geneva’s wages, and proposed making semiannual payments to the Chapter 12 trustee of $22,454.25.
- Farm Credit objected, arguing the Perkinses were not eligible “family farmers” and that the plan was not confirmable, including because it did not provide Farm Credit the present value of its secured claim and was not feasible given the Perkinses’ projected finances.

## Issues

1. Whether the Perkinses qualified as “family farmers” eligible for Chapter 12 under 11 U.S.C. § 101(18), where a large share of their farm-related revenue came from a custom cattle-feeding arrangement for cattle owned by a third party.
2. Whether the Second Amended Chapter 12 plan was confirmable under 11 U.S.C. § 1225, including (a) whether the plan was feasible under § 1225(a)(6) and (b) whether it provided Farm Credit the present value of its allowed secured claim under § 1225(a)(5).

## Decision

- The court held that the Perkinses met the “family farmer” eligibility requirements for Chapter 12.
- The court sustained Farm Credit’s objection to confirmation on confirmability grounds and denied confirmation of the Second Amended plan.
- The court concluded the plan was not feasible and did not satisfy the present-value requirement for Farm Credit’s secured claim.

## Legal Principles

- Chapter 12 eligibility requires, among other things, that the debtors’ income satisfy the farm-income threshold in 11 U.S.C. § 101(18) and that the income be tied to a “farming operation” as defined in 11 U.S.C. § 101(21).
- A “farming operation” determination is fact-driven and may include nontraditional farm arrangements, such as a contract or custom livestock-care business, when the debtor’s work is tied to raising or caring for livestock on a farm and bears ordinary farm-related variability (for example, weather, disease, and production conditions).
- Courts assess “farming operation” status using a totality-of-the-circumstances approach, considering factors such as the farm setting, the nature of the enterprise, the debtor’s day-to-day involvement with livestock or production activity, the presence and use of farm assets and equipment, and whether the operation functions like a farm business rather than a passive investment.
- For confirmation over a secured creditor’s objection, 11 U.S.C. § 1225(a)(5)(B) requires that (1) the creditor retain its lien and (2) the stream of payments under the plan equal the present value of the allowed secured claim as of the plan’s effective date.
- Present value is evaluated in light of the proposed interest rate, payment timing, and risk to the creditor; a long payout period coupled with a large balloon payment can heighten concerns where the record does not show a reliable ability to make the balloon payment or otherwise protect the creditor against delay and collateral risk.
- Under 11 U.S.C. § 1225(a)(6), the debtor bears the burden to show feasibility—i.e., a reasonable assurance that the debtor can make plan payments and meet ongoing obligations based on objective financial support rather than optimism.
- When projected income and expense schedules show little or no margin after required plan payments (including payments to the trustee and secured creditors), the debtor may fail to meet the feasibility requirement.

## Conclusion

In re Perkins held that the Perkinses’ cattle activities—including paid daily care of third-party cattle on their leased farm alongside their own cattle—qualified as a “farming operation,” making them eligible Chapter 12 “family farmers,” but the bankruptcy court denied confirmation because the proposed payment structure (including a balloon payment) and the debtors’ financial projections did not show feasible performance and did not provide Farm Credit the present value of its secured claim.


In re Perkins, 2013 WL 5863732 (2013)