In 1986, Congress enacted Chapter 12 of the Bankruptcy Code. Chapter 12 bankruptcies are exclusively for family farmers and fishermen to restructure their finances and avoid liquidation or foreclosure. Originally, Chapter 12 was passed to address the financial difficulties that farmers encountered in the 1980s. Congress made Chapter 12 permanent in 2005.
Chapter 12 bankruptcies are relatively rare. Out of the 1.4 million bankruptcies that were filed in the United States in 2011, only 637 of them were Chapter 12 bankruptcy cases. Only a family farmer or fisherman with regular annual income may file for this chapter of bankruptcy. His or her income may be seasonal as long as it is stable and regular so that the farmer or fisherman can make payments under the plan. Debtors must be a part of a farming or commercial fishing operation and must also owe 50% of their total debts on account of farming operations or 80% of their total debts due to commercial fishing operations. In addition, debtors must also derive more than 50% of their gross income from farming or commercial fishing operations. Corporations and partnerships can also file for Chapter 12 bankruptcy; however, they cannot file unless a single family owns more than 50% of their stock or equity interests.
Chapter 12 bankruptcies are friendlier to the debtor than Chapter 13 filings. Most debtors can continue farming or their fishing operations after they file; however, they must propose a repayment plan within 90 days of filing. These debts will be paid to creditors between 3 and 5 years. A bankruptcy trustee will be responsible for monitoring the debtor’s operation and making payments under the plan. The case will remain open until all required payments are made. Typically, most obligations are dischargeable, but child support and alimony are not. As soon as the payments are made, the court will grant the debtor a discharge, and the case is closed.
Whether you’re looking to file for bankruptcy or are wondering if bankruptcy is the right step for you, you should turn to someone whom you can trust. Look no further than the Bankruptcy Advocates! We will guide you through the process and will help you figure out which steps to take to help you achieve financial freedom. Please call us today at (618) 549-9800 for your free consultation today!