First National Bank of Durango, et al v. Woods, et al

Appellant First National Bank of Durango appealed the Bankruptcy Appellate Panel's (BAP's) decision to affirm the bankruptcy court's confirmation of the Chapter 12 bankruptcy plan of Appellees Reson and Shaun Woods. Although First National Bank raised several issues on appeal, the Tenth Circuit only reached the first: whether the Debtors were permitted to seek relief under Chapter 12 as "family farmers." The issue was one of first impression for the Tenth Circuit: when does a debt "for" a principal residence "arise[] out of a farming operation"? Upon review, the Court concluded that such a debt so arises if it is directly and substantially connected to any of the activities constituting a "farming operation" within the meaning of 11 U.S.C. 101(21). If the loan proceeds were used directly for or in a farming operation, the debt "arises out of" that farming operation. Because the Court concluded that the bankruptcy court did not apply the proper legal standard and test in its analysis of Debtors' eligibility for Chapter 12 relief, the Court remanded the case back to the bankruptcy court so that the correct law could be applied to the facts of this case. View "First National Bank of Durango, et al v. Woods, et al" on Justia Law