Many debtors contemplating filing for bankruptcy have never heard of a Chapter 12 bankruptcy. This unique bankruptcy filing is only available to owners family farmers or those in similar employment situations.
Chapter 12 options first became available in the 1980s to address the economic woes of those struggling to make their living off the land and sea. Rather than resembling the clear slate approach of Chapter 7 filings, Chapter 12 bankruptcies are more akin to filing for Chapter 13.
That means that farmers can restructure their debt obligations and make them more manageable. However, unlike the strict conditions imposed under Chapter 13, a Chapter 12 filing offers additional flexibility for debtors to make their payments because of the seasonal nature of farming.
Debtors can elect to repay their creditors over three or five years. The process itself is typically much less complicated and expensive than filing for Chapter 11.
Could I qualify for Chapter 12?
Possibly. If you (and your spouse, if married) own a farm and have debts that are less than $4,031,576, with at least half tied to the farming business, you could potentially file for Chapter 12 bankruptcy.
Also, over half of an individual’s or couple’s gross income must be from the farming operation during the prior tax year. In specific situations, partnerships and corporate farms might also be eligible for Chapter 12 bankruptcy.
A corporation or partnership may also qualify as a family farmer or fisherman under certain circumstances. If you are struggling to keep your family farm afloat in these uncertain economic times, it may be worthwhile to learn more about the requirements for filing for Chapter 12 bankruptcy.