There are various bankruptcy chapters for individuals, corporations and even municipalities (cities, counties, natural resource districts, etc), but a Chapter 12 bankruptcy is the only type specifically for Family Farmers or Fisherman.
F is for Family Farmer
For the remainder of this blog I will be referencing family farmers since I practice in Nebraska and don’t have commercial fishing (sorry, no coasts), but just remember Chapter 12 pertains to family fisherman as well.
Why are farmers so special?
Farmers are in a unique situation than most debtors. Unlike individual debtors who can file Chapter 13, farmers carry a substantial amount of secured debt. Chapter 13 has debt limits (unsecured debt of less than $360,475 and secured debt less than $1,081,400 as of 2011) which prevent most farmers from filing in that chapter, which would force those farmers into Chapter 11 business reorganization. Why is that so bad? Well, although the farmers have a significant amount of secured debt, they don’t have the resources for the extra fees that are involved with a Chapter 11. A Chapter 7 liquidation is not an option for the family farmer who wants to continue operating the farm business.
Congress changed the bankruptcy law in 1986 to create Chapter 12 which essentially streamlined the bankruptcy process for family farmers.
Chapter 12 is very similar to a Chapter 13. A plan is proposed that lasts anywhere from 36 to 60 months and is amenable to the seasonal nature of farming.
You just can’t be any farmer to be eligible for Chapter 12. If an individual or married couple, the eligibility requirements are as follows:
- The individual or married couple must be engaged in the farming operation.
- The total debt (both secured and unsecured debt) must be less than $3,792,650 as of 2011. (Less for family fisherman).
- 50% of the total debt, exclusive of the debtor’s home, must be related to the farming operation. For family fisherman, this amount is 80%.
- More than 50% of the gross income of the individual or married couple must have come from the farming operation.
For corporate or partnership farm operations, the eligibility requirements are as follows:
- More than 50% of the stock or equity in the company must be owned by one family or by one family and its relatives.
- The family or the family and its relatives must conduct the farming operation.
- The total debt (both secured and unsecured) must be less than $3,792,650. Less for family fisherman).
- At least 50% of the company’s total debt, exclusive of the debt for one home occupied by a shareholder, must be related to the farming operation.
- If the corporation issues stock, it cannot be publicly traded.
Chapter 12 is an important tool to help family farmers keep the farming operation while dealing with the debt it has accrued. Consult with an competent bankruptcy attorney in Chapter 12 to determine whether your farming operation qualifies.
Other Bankruptcy Attorneys talking about the Letter F are as follows:
Future Flow Agreement-New York Bankruptcy Attorney Jay S. Fleischman
First-Northern California Bankruptcy Lawyer, Cathy Moran
[...] F is for Family Farmer/Fishermen according to Ryan Caldwell [...]