Family Farmer

Even in today’s economy, regular income farmers and fisherman suffer from bankruptcy. These challenges can often be blamed to the ever changing weather conditions, the high cost of production to sustain the operation of small farms or fisheries, and other similar factors which leads to financial distress among family farmers and fisherman. To remedy this problem among this sector of society, the Congress enacted Chapter 12 of the Bankruptcy Code in 1986, also known as the Family Farmer or Fisherman Bankruptcy, to help family farmers and family fisherman avoid their business from getting liquidated or foreclosed by restructuring their finances. However, it wasn’t until 2005 that the temporary provisions for the said chapter were made permanent.

Family Farmer

As a type of reorganization bankruptcy, Chapter 12 or Family Farmer cases are somewhat similar to cases under Chapter 13 bankruptcy but offer more benefits to farmers and fishermen.

Chapter 12 bankruptcy eligibility

Debtors under Chapter 12 bankruptcy are not limited to literal family farmers or fishermen. Debtors under this chapter may be composed of individuals, corporations, or partnerships that run a farming or fishing business. However, there are several factors to consider before a debtor can be deemed eligible to file for a Chapter 12 bankruptcy. For one, a regular annual income is required to ensure that the debtors will be able to meet the required repayment plan. Also, the debtors must not owe more than $4,031,575 in total debts for farmers and $1,868,200 for fishermen. Debtors under this chapter must also owe 50% of their total debts on account of their operation for farmers and 80% for fishermen excluding home mortgages. Family farmers/fishermen debtors should also get more than 50% of their gross income from their farming/fishing operations. For partnerships and corporations, a single family should own more than 50% of equity interests or stocks before they can be eligible to file for a Chapter 12 bankruptcy case.

How Chapter 12 bankruptcy works

After determining a debtor’s eligibility for Chapter 12 bankruptcy, the next step for the debtor is to file their case. Just like in any other type of reorganization bankruptcy, the debtor must complete a credit counseling course and submit the necessary debt schedules. The court will appoint a bankruptcy trustee to review documents, monitor operations, advise the court, and see to the collection and disbursement of the payments according to the set repayment plan. Debtors, on the other hand, should propose a repayment or reorganization plan 90 days from the date of their bankruptcy filing.

Chapter 12 repayment plan

Since the repayment plans set under Chapter 12 is similar to that of Chapter 13 cases, the minimum years allowed for a plan period under Chapter 12 is three years. The repayment period can be extended to five years with the approval of the court. Usually, the five year extended plan is given when the debtors have domestic support obligation.

Once the repayment plan is filed by the debtor, it will be subject to court confirmation or approval which usually takes up to 45 days from the date the plan was filed. Before the hearing for approval, the Chapter 12 bankruptcy trustee will then review the proposed plan and make recommendations to the bankruptcy court.

To know more information amily farmer cases in bankruptcy, having the help of a bankruptcy lawyer is advisable.