Chapter 12 Bankruptcy: Family Farmers Don't Need to Lose It All

Chapter 12 bankruptcy is very much akin to bankruptcy chapter 13, but has several statues that apply specifically to family farms. Only farmers can apply for Chapter 12, and only small farms -- those families with debts within about $3.5 million, at least half of which are farm-related -- qualify.

Chapter 12 Bankruptcy Basics

When you file for bankruptcy under chapter 12, you are declaring your farm's insolvency to the court. The court appoints a trustee to watch over your continued operation of the farm, and restricts what you are allowed to do with your assets (to prevent any further potential loss to creditors who have interest in your cash collateral i.e. livestock, crops, and so forth.)

The court will ask you to submit a plan that repays your unsecured debts if possible, or puts 100% of your disposable income toward your debts for a period of 3-5 years if a complete repayment isn't possible within that timeframe. At the end of the plan, any debts that remain are generally dismissed by the court. Secured debts must either be repaid, or, at the end of the plan, any portion of the debt that isn't paid in cash must be paid in collateral (giving a portion of your livestock, crop, etc. to the creditor in lieu of cash.)

Because chapter 12 bankruptcy is considered a 'restructuring' bankruptcy, it does give the debtor the ability to perform certain actions such as dissolving some kinds of contract and avoiding, or undoing, certain kinds of property transfer that happened shortly before the filing. Talk to a bankruptcy attorney for specifics.

If Your Insolvency Isn't Solved By Your Plan

In some circumstances, executing a chapter 12 bankruptcy plan doesn't succeed at making a family farm solvent -- outside circumstances such as a drought or livestock disease can make a farm suddenly non-viable in the middle of their plan. In these cases, the law allows a family farm to convert a chapter 12 bankruptcy into a 'liquidation' bankruptcy: chapter 7. This allows the farm to liquidate its assets and have its debts absolved under the chapter 7 statutes.

Ready to File for Bankruptcy Under Chapter 12? Call Schmidt Law Firm

The bankruptcy attorneys at Schmidt Law Firm can help you through your farm's reorganization. We will help you file for chapter 12 bankruptcy. We will work with the court to help put together your plan; and we'll guide you through executing the plan so that you understand all of your legal obligations during that period. Call Schmidt Law Firm at 888-459-3077 today and get your farm back in business.


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