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  4.  » How long does debt repayment last in a Chapter 12 bankruptcy?

How long does debt repayment last in a Chapter 12 bankruptcy?

There are different types of bankruptcy available for people and businesses in a variety of different circumstances. An organization preparing for dissolution because the company has become unprofitable might file a Chapter 7 bankruptcy. There are other options available for companies hoping to restructure and overcome financial hardship.

Depending on the type of business, there are different bankruptcy options that can help a company bounce back from times of temporary financial hardship. Chapter 12 bankruptcy primarily exists for the benefit of those running family farms or family fishing operations. Such professionals help feed the country, but they are at risk of factors outside of their control negatively impacting their income.

A Chapter 12 bankruptcy allows those struggling to possibly operate a family farm to regain control over financial affairs by changing the operational budget and discharging certain debts. The process involves a repayment plan. How long does someone filing a Chapter 12 bankruptcy need to make payments before they become eligible for a discharge?

Chapter 12 bankruptcy requires years of payments

A family farm with generations of history could be at risk with just a few bad seasons. The need to finance equipment and farm supplies can lead to financial over-extension if crops don’t produce adequate yields due to drought or other challenges outside of a farmer’s control.

In a Chapter 12 bankruptcy, a farmer dealing with high levels of debt can potentially discharge certain debts after making a concerted effort to pay those obligations. Generally speaking, there is an expectation that the repayment plan in a Chapter 12 bankruptcy should last for at least three years. However, certain unique factors might lead to a longer repayment plan.

Questions about the timing of debt acquisition if a farmer took on new obligations shortly before filing for bankruptcy or unusually high debt loads may warrant a longer repayment plan. The courts can potentially require up to five years of structured payments to help reduce the debts owed by an agricultural enterprise prior to the completion of the Chapter 12 bankruptcy process.

Proposing a viable repayment plan is a key component of a successful Chapter 12 bankruptcy. Farmers who learn about repayment obligations by seeking personalized guidance can more effectively consider their options as they seek financial relief.