Chapter 12 Trustee
Chapter 12 Bankruptcy has a very limited application in the sense that it is specially designed for family farmers and fishermen. Structured much like a Chapter 13 Bankruptcy, Chapter 12 carries additional benefits designed to take into account the unique situation of farmers and fishers.
Requirements Under Chapter 12
Due to the special nature of the situation, the law has made more explicit requirements when it comes to Chapter 12 Bankruptcy. Ideally, the person filing the petition must meet the following requirements:
- Must be engaged in either commercial fishing or farming operations;
- More than 50% of their income must come from the fishing or farming operations;
- They must have a total debt not exceeding $4,031,575 for farmers an $1,868,200 for fishermen;
- For farmers, at least 50% of the said debt must be attributed to farming operations. For fishermen, around 80% of their liabilities must be derived from their fishing operations;
- Home mortgages are not included in the debts recognized.
How Chapter 12 Works
Farmers and fishermen who meet the above requisites are encouraged to file for a Chapter 12 Bankruptcy, following the general process done for both Chapter 7 and Chapter 13 cases. Forms are filled in and filed with the proper authorities upon which, the courts will decide whether or not the petition will be granted. A Chapter 12 Bankruptcy typically means that selected assets will be sold and utilized to systematically pay for the debts. A repayment plan is often suggested by the petitioner and deliberated over before approval. In the repayment plan, the debts are essentially rearranged so that the debtors will get their due share overtime.
Chapter 12 Trustee
Every bankruptcy case is assigned with a trustee. Their primary function is to accept payments and distribute them to proper creditors, as guided by the approved repayment plan. The trustee also appears alongside the debtor when meeting creditors, helping with the deliberation of repayment plans and generally ensuring that the financial framework is duly followed.
Trustees are often appointed by the court and must meet strict requisites before being allowed to perform their duties. Typically, a trustee must meet at least one of the following requirements:
The trustee must be competent in the job description and resides within the territory where the bankruptcy case is pending
A trustee may also be a corporation authorized by the laws to take the role of trustee. Such corporation must have an office located in one of the districts where the bankruptcy petition is being held.
Note that a trustee does not perform all the duties alone. An approval from the court gives a trustee the right to hire accountants, lawyers, appraisers, auctioneers, and various other professionals for the purpose of properly disbursing the funds of the estate, provided that these parties do not have any personal interest contrary to the welfare of the petitioner.
A trustee is often paid based on a percentage fee once the repayment plan has been fulfilled. Remaining funds are returned to the debtor prior to the termination of the relationship.
Choosing a Trustee
When choosing a trustee, take into account the following factors:
- Authority – does the trustee fall within the requirements established by law to act in behalf of the debtor?
- Experience – look for a trustee with years of experience in the field, preferably someone who specializes in Chapter 12 cases.
- Fee – ask beforehand regarding the cost of their service.
Note that you must look for a trustee who fits your personality and someone you feel you can trust.