A bankruptcy trustee is claiming that a couple who farmed in Monroe County, Arkansas tried to shield assets from creditors before filing for bankruptcy, according to a lawsuit filed by the trustee.
Kimberly and Henry Steward Jr. filed for Chapter 11 recognition in October 2018 in Helena’s Bankruptcy Court. In June, the case was converted to a Chapter 7 liquidation.
According to the Law Offices of David M. Offen, a Philadelphia bankruptcy attorney, “The most common type of bankruptcy is Chapter 7. Often referred to as liquidation bankruptcy, Chapter 7 bankruptcy is used by those who don’t have a lot of property or other assets.”
The Stewarts, owners of Stewart Farms of Brinkley, grew mostly rice and corn. The couple listed $8.1 million in debts and $10.1 million in assets when filing for bankruptcy. The Stewarts’ largest secured debt totaled $6.7 million, which was owed to Farm Credit Midsouth of Jonesboro. The couple’s farmland is securing the debt.
Prior to and after filing for bankruptcy protection, according to the lawsuit, the Stewarts carried out an “ill-planned enterprise to shield” their assets from creditors and bankruptcy liquidation. Part of the plan, according to the lawsuit, was to pretend that the couple owed themselves hundreds of thousands of dollars.
The Stewarts claimed to owe $759,000 to H.T. Stewart Farms. However, that company is a partnership comprised of the Stewarts and Henry’s adult son, Teale Stewart, from a previous marriage.
The money, the Stewarts claimed, was used for living expenses.
In a bankruptcy hearing in August, it was claimed that the Stewarts owed Teale Stewart almost $1 million.
It is also alleged that the Stewarts fraudulently transferred vehicle titles to Teale Stewart. These vehicles represented virtually all of the couple’s unencumbered assets, with a value of less than $150,000.
In a bankruptcy filing, the Stewarts said that ownership of the vehicles was transferred to Teale Stewart as payment for farm labor.
The bank trustee who filed the lawsuit also claimed that the couple opened other bank accounts and moved millions of dollars through them in order to keep the money out of the hands of creditors.
Henry Stewart operated his business as Stewart Farms, which includes 70,000 acres. The farm allegedly suffered a financial blow in 2012 when a neighboring farmer used the herbicide Gramoxone on a soybean crop that was adjacent to the Stewart Farms’ corn crop. The herbicide “drifted” across the property line, and caused “irreparable damage including stunted growth, plant kill and unproductive growth.”
The incident was the first of many that led the Stewarts on the path of bankruptcy.
The couple now lives in Mississippi and allegedly quit the farming business.