Chapter 12

Effective Farm Debt Control

The following is a brief discussion of Chapter 12 bankruptcy. It is for informational purposes only, and it is not in any way intended to give legal advice. To find experienced, qualified legal representation for your bankruptcy case, please contact the Bankruptcy Center of Joplin at 417-623-3771.

Chapter 12 Bankruptcy

Chapter 12 bankruptcy 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.

Under Chapter 12, Debtors propose a repayment plan to make installments to creditors over three to five years. Generally, the plan must provide for payments over three years unless the Court approves a longer period "for cause." But unless the plan proposes to pay 100% of domestic support claims (i.e., child support and alimony) if any exist, it must be for five years and must include all of the debtor's disposable income. In no case may a plan provide for payments over a period longer than five years. 11 U.S.C. ยง 1222(b) (c).

Simplified Filing for Family Farms

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 is better suited to large corporate reorganizations.

In addition, few family farmers or fishermen find Chapter 13 to be advantageous because it is designed for wage earners who have smaller debts than those facing family farmers. In Chapter 12, Congress sought to combine the features of the Bankruptcy Code which can provide a framework for successful family farmer and fisherman reorganizations. 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. The purpose of this 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. Chapter 12 makes allowances for situations in which family farmers or fishermen have income that is seasonal in nature.

If your family farm or fishing operation faces financial distress, Chapter 12 might be right for you. The Bankruptcy Center of Joplin handles Chapter 7 bankruptcy exclusively, but we can help you find legal counsel to represent your Chapter 12 case. Call us at 417-623-3771.

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