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Click here for the full text of this decision FACTS:A farmer, Edward Burgess, filed for Chapter 7 bankruptcy on Aug. 2, 2002. He was discharged from bankruptcy on Dec. 5, 2002. Two months later, on Feb. 20, the federal Agricultural Assistance Act of 2003 went into effect. The act provided for crop disaster payments to farmers for crop losses in 2001 or 2002. The first day farmers could apply for the relief was June 21, 2003. On Aug. 15, 2003, the trustee in Burgess’ bankruptcy received a check for nearly $25,000 from the Farm Service Agency of the Department of Agriculture under the act for Burgess’ 2001 failed crops. Burgess’ bankruptcy was reopened to decide what to do with the check. Burgess filed a motion to turn the check over to him, but the trustee argued that the funds should be applied to creditors who could not be fully paid out of the original proceeding. The bankruptcy agreed with the trustee, and the district court affirmed. HOLDING:Reversed. The court acknowledges a split in the circuits over whether crop disaster relief payments, or similar payments, are property of the estate. Bankruptcy courts in Georgia and Idaho have held that the government payments for crop losses before the debtor filed for bankruptcy are property of the estate under Bankruptcy Code 541 because they constitute proceeds of property of the estate under 541(a)(6), or because the payments themselves fall within the ambit of a legal or equitable interest under 541(a)(1). The court admits that these courts have given a plausible analysis of the issue, but the court instead follows the analysis of cases from the 8th and 9th U.S. Circuit Courts of Appeals. Those courts read the Bankruptcy Code expansively and ruled that the payments were not part of the estate. Significant to both rulings, and to this case, is the fact that the legislation providing for the crop disaster payment to Burgess did not exist at the time he filed for bankruptcy. Burgess may have had a hope that such legislation would pass, but he had no legal or equitable right to such relief at the time he filed. Nor does the court believe that crop disaster payments can be properly characterized as “proceeds” of property of the estate under 541(a)(6). That section’s reference to “proceeds” cannot retroactively create a property interest that did not exist at the start of the case. If the contingent interest in a crop disaster payment is not property of the estate, the payment itself cannot qualify as proceeds of property of the estate under 541(a)(6). OPINION:Reavley, J.; Reavley, Benavides and Prado, JJ.

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