Two Rivers Irrevocable Trust, 653 B.R. 284

Two Rivers Irrevocable Trust (formed Jan. 13, 2012) owns ~334 acres in Greene County, GA; Mike McCommons is sole trustee and his son Steven is sole beneficiary.
Property hosts a long-running motorbike facility known as Durham Town, operated over the years through multiple corporate entities owned/controlled by McCommons and family; leases were informal and funds were generally paid to those entities, not the Trust.
Petitioners Cecilia, Barry and Coleman Rogers obtained state-court judgments against several Durham Town entities and recorded judgment liens against Two Rivers Trust (Coleman’s judgment ~ $2.98M; parents’ judgment ~$154k). Petitioners filed an involuntary Chapter 7 against the Trust.
Trust documents state the Trust was created to preserve property for family/estate planning, contain a spendthrift clause, limit transferability, and terminate at beneficiaries’ deaths.
Financially, the Trust had no bank account until 2020, filed few tax returns, received little (if any) business income, and paid little on judgments and taxes; some mortgages on parcels secure McCommons’s personal loans.

Issue	Plaintiff's Argument (Rogers)	Defendant's Argument (Two Rivers Trust / McCommons)	Held
1. Is the Trust a "business trust" eligible as a Chapter 7 debtor?	Trust functions like a business/trust holding and leasing property and so is a business trust.	Trust is a family/estate planning trust (donative), created and maintained to preserve property for beneficiaries, with spendthrift and transfer restrictions.	Not a business trust; ineligible to be a Chapter 7 debtor.
2. Is the Trust "generally not paying its debts as they become due" under §303?	Trust has unpaid judgments and taxes and has not satisfied creditors.	Trust contends it is generally paying debts (or disputes characterization).	Court finds Trust generally not paying its debts.
3. Was the involuntary petition filed in bad faith / improper use of bankruptcy?	Petitioners deny bad faith and assert separate creditor interests and state remedies are inadequate.	Trust contends petition is an improper use to collect under state-law remedies and was filed in bad faith.	Petition filed in bad faith (improper use); bankruptcy would not achieve anything creditors could not obtain in state court.
4. Appropriate disposition of involuntary case	Petitioners seek an order for relief.	Trust seeks dismissal.	Case dismissed for lack of debtor-eligibility and because petition was filed in bad faith.

Hecht v. Malley, 265 U.S. 144 (U.S. 1924) (pre–Bankruptcy Code authority on nature of trusts).
Morrissey v. Commissioner of Internal Revenue, 296 U.S. 344 (U.S. 1935) (identifies salient features of a "business trust").
In re Quadruple D Trust, 639 B.R. 204 (Bankr. D. Colo. 2022) (framework for defining "business trust" under Bankruptcy Code).
In re Pace, 376 B.R. 334 (Bankr. M.D. Fla. 2007) (trust created for estate/family planning held not a business trust).
In re Catholic School Employees’ Pension Trust, 599 B.R. 634 (B.A.P. 1st Cir. 2019) (discussing fact-specific, purpose-and-operations inquiry).
General Trading, Inc. v. Yale Materials Handling Corp., 119 F.3d 1485 (11th Cir. 1997) (approaches for analyzing bad faith in involuntary petitions).
Montgomery v. Ryan (In re Montgomery), 37 F.3d 413 (8th Cir. 1994) (party filing petition bears burden to establish eligibility).