Attorneys for an organic Kona coffee farm and a mainland lender clashed in U.S. Bankruptcy Court in Honolulu on Tuesday over whether the farm and a sister company should be in bankruptcy.

Owners of Mountain Thunder Coffee Plantation claim they are being victimized by a predatory lender that is attempting to prevent them from refinancing close to $5 million in loans and staying in business.

The lender, GemCap Lending I LLC, claims that Mountain Thunder and an affiliate are insolvent because of mismanagement, and should be liquidated to repay the bad loans.

Bankruptcy Judge Robert Faris held off on allowing GemCap to restrict day-to-day operations of the coffee businesses, including use of cash to buy ripe beans from other farmers for processing. However, Faris anticipated that the dispute, which began in December in state Circuit Court on Hawaii island, where it is still pending, will be resolved in his court.

“I really do think … we’re going to end up with a bankruptcy here,” he said.

GemCap and a few other creditors petitioned Bankruptcy Court two weeks ago to force Mountain Thunder and sister company Naturescape Holding Group International Inc. into bankruptcy so that business assets could be controlled by a court-appointed trustee and then sold to pay GemCap.

Such a liquidation would essentially end the life of a roughly 20-year-old business that owners Trent and Lisa Bateman built into what they said is Hawaii’s largest organic Kona coffee farm, where a 1-pound bag of roasted beans sells for as much as $69. But it’s possible that Mountain Thunder and Naturescape reorganize their debts in bankruptcy and stay in business.

Other potential outcomes include another lender refinancing GemCap’s debt or a foreclosure sale of Mountain Thunder and Naturescape assets in Circuit Court to benefit GemCap.

Kristin Holland, a local attorney representing California-based GemCap, told Faris that a receiver appointed by Circuit Judge Ronald Ibarra to oversee operation of the coffee businesses is wasting $3,000 a day buying more coffee beans from other farmers as it loses money on sales that should be going to pay back the lender.

“It’s a wasting asset,” she said, alleging that the value of farm assets excluding real estate decreased to $1.9 million from $2.8 million in January. “It’s like a melting ice cream cone. It still exists but it’s getting smaller and melting every day.”

Holland contended that Kona coffee farmers who supplied Mountain Thunder with beans last season are owed $900,000 to $1 million. GemCap said it is first in line to be repaid before other creditors because its loans are secured by Mountain Thunder and Naturescape assets. Although GemCap claims that its debt outweighs the value of assets, Holland said the lender is willing to pass along $100,000 to junior creditors if a bankruptcy liquidation happens.

Stephen Mau, an attorney representing the Circuit Court receiver overseeing the farm operations, George Van Buren, disputed that the organic coffee farm is losing money.

“We think quite frankly it is making money,” Mau said.

Mau said that since Van Buren was appointed in January, the cash balance for the companies went up by $400,000 and that GemCap received $300,000.

Holland argued that there is no profit because Mountain Thunder did not pay for the beans being sold this year.

Chuck Choi, a local bankruptcy attorney representing Mountain Thunder and Naturescape, told Faris that GemCap collected $750,000 last year from the companies and prevented payments to farmers that had not been made before the December foreclosure lawsuit was filed.

Choi noted that the Circuit Court judge has given the Batemans until Nov. 14 to refinance the GemCap debt with Minnesota-based Unity Bank, and said this effort should not be cut short by bankruptcy.

“A refinance is in the best interest of unsecured creditors,” he said.

Faris asked Van Buren to continue overseeing the businesses as directed in Circuit Court but to file financial reports and other documents that will help the bankruptcy judge ascertain whether the coffee companies are making money. A hearing to determine whether Mountain Thunder and Naturescape should be in bankruptcy is scheduled for Oct. 27.