What is Chapter 12 Bankruptcy?
Chapter 12 bankruptcy is similar to Chapter 11, except that it is designed to help agriculture businesses. It can help you overcome agricultural or farm debt of any type by allowing you to build a repayment plan to pay off reduced debts in a manner that works within your means. Our attorneys can help family farmers, greenhouses and any other type of agricultural business. We can help you move past this and move forward.
Chapter 12 bankruptcy is a special chapter for “family farmers” that is intended to enable farmers to keep their farms and continue their farming operations. A “family farmer” is a person or business that receives at least 50% of his or her income from farming. A family farmer may not file Chapter 12 bankruptcy unless at least 80% of his or her debts are related to the farm and the total debts are less than $3,544,525. In Chapter 12 bankruptcy, the debtor proposes a payment plan to the court and the creditors that shows how the debtor will pay the debts over time. The debtor must pay the creditors at least as much as they would receive in a Chapter 7 bankruptcy. The payment plan must be approved by the bankruptcy court. A trustee reviews the debtor’s schedules and payment plan. Unlike in Chapter 13, the creditors may make only limited objections to the plan in Chapter 12. If the court approves the debtor’s plan, the trustee collects payments from the debtor and pays the creditors; ofte
Chapter 12 is designed for “family farmers” or “family fishermen” with “regular annual income.” It enables financially distressed family farmers and fishermen to propose and carry out a plan to repay all or part of their debts. The purpose of the “regular annual income” requirement is to ensure that the debtor’s annual income is sufficiently stable and regular to permit the debtor to make payments under a chapter 12 plan. But chapter 12 makes allowance for situations in which family farmers or fishermen have income that is seasonal in nature. Relief under chapter 12 is voluntary, and only the debtor may file a petition under the chapter. In tailoring bankruptcy law to meet the economic realities of family farming and the family fisherman, chapter 12 eliminates many of the barriers such debtors would face if seeking to reorganize under either chapter 11 or 13 of the Bankruptcy Code. For example, chapter 12 is more streamlined, less complicated, and less expensive than chapter 11, which
When a person or a business incurs debts that are beyond the possibility of repayment, it is common to seek bankruptcy protection to avoid having assets seized by creditors. Bankruptcy often comes as a result of tough economic times, whether on a general or personal basis. Various types of bankruptcy protection are provided for by United States law. Chapter 12 bankruptcy is designed specifically to meet the needs of family farmers and fishermen, and because of this, it is less well-known than other types of bankruptcy protection. For the purposes of chapter 12 bankruptcy, a family farmer is defined by several tests. First, the farmer’s debts may not exceed $1.5 million U.S. Dollars (USD), and at least 80% of this debt must be related to farming. Debt owed on a home is not computed as part of this total unless it is directly connected to the farming operation. The law also requires that a farmer who files for chapter 12 bankruptcy must have earned at least half of his gross income from
