Chapter 12 bankruptcy is a solution designed specifically for family farmers and fishers. Businesses that can benefit from this bankruptcy option include horse farms, logging and timber operations, greenhouses, and other businesses in this category. When debt from your family business starts piling up and you owe more than you can realistically repay, you may want to look into options that allow you to keep your business operational. With a Chapter 12 plan, debtors can pay back creditors while maintaining control of the farm or fishery. Our Chapter 12 bankruptcy lawyer can help.
Should I consider Chapter 12 bankruptcy?
If you’re struggling to keep your family farm or fishery open under the weight of excess debt, Chapter 12 is one tool that might be available to you. This bankruptcy option aims to address the financial challenges and realities of fishermen and farmers. Those who go this route can avoid some of the common hurdles associated with other bankruptcy options.
Am I eligible for Chapter 12?
Chapter 12 has very specific requirements that debtors must meet, including:
- At least half of the operation’s annual income must come from farming or fishing
- Farming operations have a debt limit of $4,153,150 and fishing operations have a debt limit of $1,924,550 (as of 2020)
- Willingness to repay and restructure debt
- For farmers, half of total debt must come from farming operations; for fishermen, 80% of debt must come from fishing operations
What if I don’t qualify for Chapter 12?
That’s ok. If you don’t qualify for Chapter 12, that means you would either qualify for Chapter 11 bankruptcy or Chapter 13 bankruptcy. If you are a corporation or LLC, you would like need to file Chapter 11 bankruptcy instead. As a sole proprietor or partnership, you may be able to file a Chapter 13 bankruptcy instead.
We can help you file under Chapter 11 or Chapter 13 even if you do not qualify for Chapter 12. Our bankruptcy lawyers are well-versed in all chapters of the Bankruptcy Code.
Benefits of Chapter 12 Bankruptcy
For those who qualify, Chapter 12 offers a number of benefits. With this option, debtors can adjust their repayment schedule to accommodate their seasonal earning trends. If your farm or fishery brings in the majority of its income during a short timeframe, you can negotiate a payment schedule that reflects this.
For many, the most important benefit of Chapter 12 is keeping the family business open. If your farm or fishery has been in the family for generations or is your family’s only source of income, Chapter 12 offers flexible repayment options that let you continue daily operations and navigate a difficult financial period.
Chapter 12 repayment plans provide realistic solutions for those in farming and fishing. Depending on your obligations, you should finish your repayment plan within three to five years. At the end of the agreed-upon repayment period, your remaining unsecured debt is discharged.
