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- Chapter 12 Bankruptcy is designed for "Family Farmers" or "Family Fishermen" with regular income
Chapter 12 Bankruptcy is designed for "family farmers" or "family fishermen" with "regular annual income."
Chapter 12 Bankruptcy enables financially distressed family farmers and fishermen to propose and carry out
a plan to repay all or part of their debts. Under Chapter 12, debtors propose a repayment plan to make
installments to creditors over three to five years. Generally, the Chapter 12 plan must provide for
payments over three years unless the court approves a longer period for "cause." But unless the Chapter 12 Bankruptcy
plan proposes to pay 100% of domestic support claims (i.e. child support and alimony) if any exist, it must be for five year
and must include all of the debtor's disposable income. In no case may a Chapter 12 Bankruptcy plan
provide for payments for over five years.
- Chapter 12 Bankruptcy Law recognizes the unique financial problems of Family Farmer and Fishermen
In tailoring the Bankruptcy Law to meet the economic realities of family farming and the family fishermen,
Chapter 12 Bankruptcy Law eliminates many of the barriers such debtors would face if seeking to reorganize
under either Chapter 11 and Chapter 13 of the Bankruptcy Code. For example, Chapter 12 Bankruptcy is more streamlined,
less complicated, and less expensive than a Chapter 11 Bankruptcy, which is better suited for large corporate bankruptcy reorganizations. In addition, few family farmers or
fishermen find Chapter 13 Bankruptcy Law to be advantageous because it is designed for wage earner who have smaller debts and assets than family farmer typically
face. In drafting Chapter 12, Congress sought to combine the features of the Bankruptcy Law
which provide a framework for a successful family farmer and fishermen reorganization Bankruptcy.
- Chapter 12 Bankruptcy allows for seasonal income
The Bankruptcy Code provides that only a family farmer or family fisherman with "regular annual income"
may file a petition for relief under Chapter 12 of the Bankruptcy Code. The requirement
ensures that the debtor's annual income is sufficient stable and regular permit the debtor to make payments under a Chapter
12 Bankruptcy plan. Chapter 12 of the Bankruptcy Code allows payments from
the debtors seasonally.
- Chapter 12 Bankruptcy can be filed by individuals, corporations and partnerships
Under the Bankruptcy Code, individual, corporate and partnership "Family Farmers" and "Family Fishermen" are
eligible to file Chapter 12 Bankruptcy "Family Farmers" and "Family Fishermen."
- Individual Eligibility for Chapter 12 Bankruptcy
The four criteria necessary for filing Chapter 12 Bankruptcy are as follows.
- Engaged in farming or commercial fishings;
- Total debts of less than $3,237,000 for farmers and $1,500,000 for fishermen;
- For family farmers at least 50% of the debt, and at least 80% of the debt for family fishermen (excluding the debtor's
home) must be related to the farming or commercial fishing;
- More than 50% of the gross income for the husband and wife from the proceeding year (for family fishermen), or past 3
years (for family farmers) must have come from the family farm or fishing business.
- Corporate or Partnership Eligibility for Chapter 12 Bankruptcy filing
A corporate or partnership is eligible for filing Chapter 12 Bankruptcy if the following
criteria are met.
- More than one-half of the outstanding stock or equity in the corporation or partnership must be owned by one family or
by one family and its relatives;
- The family or the family and its relatives must conduct the farming or commericial fishing operation;
- More than 80% of the value of the corporate or partnership assets must be related to the farming or fishing operation;
- The total debt of the corporation or partnership must not excced $3,237,000 for farmer and $1,500,000 for fishermen;
- At least 50% for a farming operation, and 80% for a fishing operation of the corporation's or partnership's total debts
(excluding one home for the shareholders) must be related to farming or fishing;
- Any stock issued by the corporation cannot be publicly traded.
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