Chapter 12 is section of the bankruptcy code designed for the reorganization of family farms and fishermen. The family farm can be classified as an individual, a corporation, or a partnership.

Who is Considered a Fisherman or Farmer?

There are a number of requirements to qualify for Chapter 12:

For Individuals:

  • Must engage in commercial fishing or farming
  • The debt limit must not exceed $3.2 million for farmers and $1.5 million for fishermen
  • Family farms must have at least 50% of the debt coming from the farm. For the fisherman this number must be 80%
  • At least 50% of the gross income must be from the farming or fishing operation

Corporations and partnerships have more extensive qualification requirements.

Filing a Chapter 12

In order to file for bankruptcy under chapter 12, you must obtain all of your financial information and complete the Voluntary Petition, the schedules, and the Statement of Financial Affairs. Once the documents are complete, they are then filed with the clerk of the bankruptcy court.

Once Chapter 12 case is filed, the automatic stay goes into effect. Chapter 12 is special in this regard because the automatic stay will protect both the farmer and third parties who are liable on the debt from the creditors.

What Happens After Filing?

Chapter 12 Plan – The debtor is required to propose a plan that pays off creditors within 3 to 5 years. The bankruptcy judge must then approve the plan and debtor must make the payments to the trustee who then pays the creditors.

Discharge of Debt – Discharge is awarded when all of the payments in the plan are made.

If you are not able to complete the payment plan due to an unforeseen event such as a serious illness, you may be awarded a "hardship discharge."

Can I File For Other Kinds of Bankruptcy?

Chapter 7 bankruptcy is for individuals who want to eliminate unsecured debts like credit card debts and car loans. Although a farmer or fisherman could file for Chapter 7, Chapter 12 bankruptcy provides for repayment of debts over time rather than liquidation of assets.

Chapter 13 bankruptcy allows a debtor to repay debts over time. Chapter 12 and bankruptcy are extremely similar, but Chapter 12 bankruptcy is specifically tailored for fishermen and farmers.

Getting Started

If you are considering filing a chapter 12 bankruptcy, it is best to get in touch with a bankruptcy attorney who can guide you through the process.