Chapter 12 Bankruptcy

The United States Bankruptcy Code outlines the different procedures for filing bankruptcy. Chapter 12 bankruptcy is the kind tailored for farmers, fishermen, and their families who are drowning in debt and wish to avoid foreclosure, having their business closed, or cease operations. Chapter 12 bankruptcy initially was a quick way to relieve financial pressures. Eventually, in the 2000s, it was recognized as a bankruptcy chapter. 

This kind of bankruptcy is a better fit for these families than Chapter 11, which is more for typical businesses since it is more direct. It is a Chapter 13 process that allows Chapter 12 filers to have more debt than an actual Chapter 13 case. 

If you are struggling with debt and are looking to file for a Chapter 12 bankruptcy, it is wise to consult a Chapter 12 bankruptcy lawyer in Ohio to help you get through the bankruptcy process. 

Who Can Qualify for Chapter 12 Bankruptcy?

Chapter 12 bankruptcy is specifically for family farmers and fishermen. If you plan on filing as an individual, you must have:

• A farming or fishing operation
• A regular annual income or stable, predictable income
• Half of the gross income must be from farming or fishing
• The total debts of the farmer must not exceed $11,097,350, while fishermen can’t have more than $2,268,550 in debt.

Partnerships and corporations can file Chapter 12 bankruptcy if the family owns more than 50% of the stock or equity. Our Ohio law office has an experienced bankruptcy attorney ready to serve you! Call us today to explore your options. 

What are the Steps Involved in Chapter 12 Bankruptcy?

Chapter 12 bankruptcy allows fishermen and farmers to continue operations, but it isn’t all easy work. There are steps they must first consider, including:

• Take a Credit Counseling Class. Filing as an individual requires you to attend a credit counseling class before submitting bankruptcy documents or paperwork to bankruptcy court.
• Chapter 12 Bankruptcy Filing. The bankruptcy case begins with filing. Upon filing, the account goes into automatic stay, which stops collectors or creditors from pursuing debt-collection lawsuits. 
• Give Trustee Documents and Attend the Meeting of Creditors. Before the meeting of creditors, you must provide documents such as profit and loss statements and tax returns.
• File the Proposed Chapter 12 Plan. You are given 90 days to file for your Chapter 12 plan, ideally before the 341 meetings. 
• Attend Confirmation Hearing. A hearing will be set within 45 days of the plan’s filing. Suppose the debtors, creditors, and trustees cannot resolve the problem. In that case, the judge will consider each side before arriving at a verdict. 
• Receiving the Discharge. The bankruptcy court will monitor your case until you make the necessary payments. You must also complete a debtor’s education class before the court closes the matter and grants you a discharge. 

What are the Elements of the Chapter 12 Payment Plan?

The Chapter 12 payment plan has the following essential elements:

• Required Plan Payments. This is when the debtor turns over their disposable income to the Chapter 12 trustee. In this context, disposable income pertains to the difference between the revenue generated by the farm or fisheries and the amount needed to cover business expenses. 
• Mortgages/Other Secured Debt. Debtors can reduce secured debt like mortgages and boat loans in Chapter 12 bankruptcies. Any balance owed over the collateral value becomes unsecured debt. 
• Trustee Fee. Trustees will receive a percentage of the funds

Debt Discharge. The plans must meet the creditor’s best interest test. The best interest test requires creditors to obtain as much under a Chapter 12 bankruptcy as they would in a Chapter 7 bankruptcy.