Chapter 12 Bankruptcy
(Disclaimer: The information contained on this page is provided for general information purposes only and is not intended to be a legal opinion, legal advice or a complete discussion of the issues related to the area of consumer bankruptcy. Every individual's factual situation is different and you should seek independent legal advice from an attorney familiar with the laws of your state or locality regarding specific information.)
What is Chapter 12 Bankruptcy?
Chapter 12 Bankruptcy provides debt reorganization for individuals or partnerships classified as "family farmers" or "family fishermen". Chapter 12 is nearly identical to Chapter 13, in that it involves establishing a plan to repay debts over the course of a three to five year period. However, Chapter 12 includes several provisional differences that specifically address needs unique to owners in the farm and fishing industries.
How does Chapter 12 address the needs of farmers and fishermen?
The key advantage of Chapter 12 Bankruptcy for farmers and fishermen is the allowance of a higher debt ceiling than is provided by Chapter 13. This higher ceiling is required due to the fact that owners of farm or fishing businesses will typically incure much higher debts than the average wage-earner. While the corporate-oriented Chapter 11 option also has higher limits, it is far more complex and expensive to file than Chapter 12 Bankruptcy.
Which farm and fishing businesses qualify for Chapter 12 relief?
To file for Chapter 12 Bankruptcy relief, an individual classified as a family farmer or fisherman must meet criteria including the following key points:
• You must currently be engaged in a farming/fishing operation
• Total unsecured and secured debts of the operation shall not exceed $3,237,000
• At least 80% of your fixed-amount debts must relate to your farm or fishing business
• Over 50% of your gross income for the preceding tax year must have been raised by the farming/fishing operation
Can couples file jointly? What about farming partnerships?
Yes, a husband and wife for instance, may file a single joint petition. A partnership may file corporately, but will be subject to additional qualifications, which include:
• Over 50% of outstanding stock/equity in the partnership must be held by one family
• This family must conduct actual farming operations
• The farming operation may not issue publicly traded stock
If I file for Chapter 12 Bankruptcy, will I remain in control of my farm?
In terms of farm operations, yes. While chapter 12 mandates the assignment of a court-appointed Trustee, control of day-to-day operations remains in the hands of the debtor. In Chapter 12 cases, the Trustee's function is limited to financial oversight. The Trustee is responsible for making recommendations regarding Chapter 12 dischargeability, exchanging information with interested parties, verifying that the debtor will be able to make payments on time, etc., etc.
What is Chapter 12 Bankruptcy?
Chapter 12 Bankruptcy provides debt reorganization for individuals or partnerships classified as "family farmers" or "family fishermen". Chapter 12 is nearly identical to Chapter 13, in that it involves establishing a plan to repay debts over the course of a three to five year period. However, Chapter 12 includes several provisional differences that specifically address needs unique to owners in the farm and fishing industries.
How does Chapter 12 address the needs of farmers and fishermen?
The key advantage of Chapter 12 Bankruptcy for farmers and fishermen is the allowance of a higher debt ceiling than is provided by Chapter 13. This higher ceiling is required due to the fact that owners of farm or fishing businesses will typically incure much higher debts than the average wage-earner. While the corporate-oriented Chapter 11 option also has higher limits, it is far more complex and expensive to file than Chapter 12 Bankruptcy.
Which farm and fishing businesses qualify for Chapter 12 relief?
To file for Chapter 12 Bankruptcy relief, an individual classified as a family farmer or fisherman must meet criteria including the following key points:
• You must currently be engaged in a farming/fishing operation
• Total unsecured and secured debts of the operation shall not exceed $3,237,000
• At least 80% of your fixed-amount debts must relate to your farm or fishing business
• Over 50% of your gross income for the preceding tax year must have been raised by the farming/fishing operation
Can couples file jointly? What about farming partnerships?
Yes, a husband and wife for instance, may file a single joint petition. A partnership may file corporately, but will be subject to additional qualifications, which include:
• Over 50% of outstanding stock/equity in the partnership must be held by one family
• This family must conduct actual farming operations
• The farming operation may not issue publicly traded stock
If I file for Chapter 12 Bankruptcy, will I remain in control of my farm?
In terms of farm operations, yes. While chapter 12 mandates the assignment of a court-appointed Trustee, control of day-to-day operations remains in the hands of the debtor. In Chapter 12 cases, the Trustee's function is limited to financial oversight. The Trustee is responsible for making recommendations regarding Chapter 12 dischargeability, exchanging information with interested parties, verifying that the debtor will be able to make payments on time, etc., etc.
More Information:
Our Top Five Consumer Bankruptcy Tips:
1. Bankruptcy relief is still available.
You may have heard about a new law passed by Congress that went into effect in October 2005. While it is true that the new law makes the process more complicated, the basic right to file bankruptcy and most of the benefits derived from it remain unchanged for most consumers. The cost of filing for bankruptcy also has increased, both in terms of fees you to have to pay the court and the fee you will have to pay your attorney.
2. Consult with a knowledgeable bankruptcy lawyer before filing for bankruptcy.
The decision to file for bankruptcy requires careful analysis and consideration of a number of factors. You should file for bankruptcy only after determining that it is the best way to deal with your financial problems. Because of a number of potential pitfalls in the new law, or what one consumer advocate called "gotchas", it is absolutely essential that consumers consult with a knowledgeable bankruptcy attorney before starting the process. For example, if your case is dismissed for not filing a required document, you may not be able to get the full benefit of a bankruptcy unless you wait a year to file again.
3. Do not procrastinate if you are facing legal action.
One provision of the new law requires that consumers receive credit counseling from an approved agency before filing for bankruptcy. If you are facing a mortgage foreclosure, car repossession, wage attachment or other imminent loss of property, you should contact a knowledgeable bankruptcy attorney immediately. He or she can help you obtain approved credit counseling so that you do so in sufficient time for the bankruptcy to be filed to stop the foreclosure sale or repossession. In order to complete the bankruptcy process, consumers also need to complete a debt education course. Again, this must be done through an approved provider and a bankruptcy attorney can point you in the right direction.
4. Avoiding "Credit Repair" and "Credit Counseling" Scams
With over a million Americans filing for bankruptcy each year and with household debt at record highs, consumers are reaching out to "credit counselors" and "credit repair" companies with increasing frequency. Although there has been a recent surge in the number of these organizations readily available to offer help to consumers, there has also been a rampant increase in the number of unscrupulous operators ready to take advantage of unsuspecting debtors. A lawyer experienced in consumer credit or bankruptcy law can help protect debtors from these unscrupulous practices and advise them on the most prudent course of action.
5. Bankruptcy and its effect on your credit.
By federal law, a bankruptcy can remain part of a debtor's credit history for 10 years. Whether or not the debtor will be granted credit in the future is unpredictable, and probably depends more on what good things the debtor does in the nature of keeping a job, saving money, making timely payments on secured debts, etc., than the fact that the debtor filed bankruptcy. In some cases it may actually be easier to obtain future credit after bankruptcy, because new creditors may feel that since the old obligations have been discharged, they will be first in line. They also recognize that the debtor cannot again file bankruptcy for at least the next four years in the case of chapter 13 or eight years in the case of chapter 7. The truth is that if a debtor cannot pay his or her bills, and the debtor's credit is already ruined or exhausted, filing bankruptcy can actually be an important first step in re-building credit.
You may have heard about a new law passed by Congress that went into effect in October 2005. While it is true that the new law makes the process more complicated, the basic right to file bankruptcy and most of the benefits derived from it remain unchanged for most consumers. The cost of filing for bankruptcy also has increased, both in terms of fees you to have to pay the court and the fee you will have to pay your attorney.
2. Consult with a knowledgeable bankruptcy lawyer before filing for bankruptcy.
The decision to file for bankruptcy requires careful analysis and consideration of a number of factors. You should file for bankruptcy only after determining that it is the best way to deal with your financial problems. Because of a number of potential pitfalls in the new law, or what one consumer advocate called "gotchas", it is absolutely essential that consumers consult with a knowledgeable bankruptcy attorney before starting the process. For example, if your case is dismissed for not filing a required document, you may not be able to get the full benefit of a bankruptcy unless you wait a year to file again.
3. Do not procrastinate if you are facing legal action.
One provision of the new law requires that consumers receive credit counseling from an approved agency before filing for bankruptcy. If you are facing a mortgage foreclosure, car repossession, wage attachment or other imminent loss of property, you should contact a knowledgeable bankruptcy attorney immediately. He or she can help you obtain approved credit counseling so that you do so in sufficient time for the bankruptcy to be filed to stop the foreclosure sale or repossession. In order to complete the bankruptcy process, consumers also need to complete a debt education course. Again, this must be done through an approved provider and a bankruptcy attorney can point you in the right direction.
4. Avoiding "Credit Repair" and "Credit Counseling" Scams
With over a million Americans filing for bankruptcy each year and with household debt at record highs, consumers are reaching out to "credit counselors" and "credit repair" companies with increasing frequency. Although there has been a recent surge in the number of these organizations readily available to offer help to consumers, there has also been a rampant increase in the number of unscrupulous operators ready to take advantage of unsuspecting debtors. A lawyer experienced in consumer credit or bankruptcy law can help protect debtors from these unscrupulous practices and advise them on the most prudent course of action.
5. Bankruptcy and its effect on your credit.
By federal law, a bankruptcy can remain part of a debtor's credit history for 10 years. Whether or not the debtor will be granted credit in the future is unpredictable, and probably depends more on what good things the debtor does in the nature of keeping a job, saving money, making timely payments on secured debts, etc., than the fact that the debtor filed bankruptcy. In some cases it may actually be easier to obtain future credit after bankruptcy, because new creditors may feel that since the old obligations have been discharged, they will be first in line. They also recognize that the debtor cannot again file bankruptcy for at least the next four years in the case of chapter 13 or eight years in the case of chapter 7. The truth is that if a debtor cannot pay his or her bills, and the debtor's credit is already ruined or exhausted, filing bankruptcy can actually be an important first step in re-building credit.
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