Bankruptcy Reorganization for Farmers and Fisherman
Chapter 12 Bankruptcy is a used specifically for "family farmers" or "family fishermen". Compared to Chapter 13 individual debt adjustment and Chapter 11 reorganization, there are very few Chapter 12 Bankruptcy cases filed in Texas, or throughout the nation for that matter. Chapter 12 Bankruptcy, like a Chapter 11 and Chapter 13, is a reorganization bankruptcy. Chapter 12 is for farmers or fishermen whose debts fall within certain limits and whose primary source of income comes from farming or fishing.
Congress added Chapter 12 Bankruptcy to the United States Bankruptcy Code in 1986. At that time it was referred to as “Adjustments of Debts of a Family Farmer with Regular Annual Income”. The Bankruptcy legislation at that time was intended to respond to the downturn in the farming economy in the 1980s.
Chapter 12 Bankruptcy was modeled after Chapter 13 Bankruptcy, which is personal debt reorganization or otherwise referred to as consumer individual debt adjustment. The creation of Chapter 12 Bankruptcy was intended to provide farmers with the opportunity to reorganize their debt and preserve their farms through a streamlined and expeditious bankruptcy process.
Chapter 12 Bankruptcy legislation was originally enacted as a temporary solution to reorganize farmer’s debts; however the changes to the bankruptcy law known as the Bankruptcy Abuse Prevention & Consumer Protection Act (BAPCPA) made Chapter 12 a permanent part of the United States Bankruptcy Code.
The BAPCPA changes the Bankruptcy Code for "family farmers" and "family fishermen" fall into two categories:
- an individual or individual and spouse and;
- a corporation or partnership.
Farmers or fishermen that fall into the first category must meet each of the following four criteria as of the date the petition is filed in order to qualify for relief under Chapter 12 Bankruptcy:
- The individual or husband and wife must be engaged in a farming operation or a commercial fishing operation.
- The total debts (both secured and unsecured) of the operation must not exceed $3,237,000 (if a farming operation) or $1,500,000 (if a commercial fishing operation).
- If the debtor is a a family farmer, at least 50%, and if the debtor is a family fisherman at least 80%, of the total debts that are fixed in amount (exclusive of debt for the debtor's home) must be related to the farming or commercial fishing operation.
- More than 50% of the gross income of the individual or the husband and wife for the preceding tax year (or, for family farmers only, for each of the 2nd and 3rd prior tax years) must have come from the farming or commercial fishing operation.
In order for a corporation or partnership to fall within the second category of debtors eligible to file as family farmers or family fishermen, the corporation or partnership must meet each of the following criteria as of the date of the filing of the petition:
- More than one-half the outstanding stock or equity in the corporation or partnership 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 or commercial fishing operation.
- More than 80% of the value of the corporate or partnership assets must be related to the farming or fishing operation.
- The total indebtedness of the corporation or partnership must not exceed $3,237,000 (if a farming operation) or $1,500,000 (if a commercial fishing operation).
- At least 50% for a farming operation or 80% for a fishing operation of the corporation's or partnership's total debts which are fixed in amount (exclusive of debt for one home occupied by a shareholder) must be related to the farming or fishing operation.
- If the corporation issues stock, the stock cannot be publicly traded.
A debtor cannot file under Chapter 12 (or any other chapter of bankruptcy) if during the preceding 180 days a prior bankruptcy petition was dismissed due to the debtor's willful failure to appear before the court or comply with orders of the court or was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property upon which they hold liens. 11 U.S.C. §§ 109(g), 362(d) and (e). In addition, no individual may be a debtor under Chapter 12 or any chapter of the Bankruptcy Code unless he or she has, within 180 days before filing, received credit counseling from an approved credit counseling agency either in an individual or group briefing. 11 U.S.C. §§ 109, 111. There are exceptions in emergency situations or where the U.S. Trustee (or bankruptcy administrator) has determined that there are insufficient approved agencies to provide the required counseling. If a debt management plan is developed during required credit counseling, it must be filed with the court.
Since Chapter 12 was specifically designed for "family farmers" or "family fishermen" with "regular annual income." It can enable financially distressed family farmers and fishermen to propose and effectuate a repayment plan to repay all or part of their debts under the protection and approval of the Bankruptcy Court. Under Chapter 12 Bankruptcy, the debtor (the party filing bankruptcy) proposes a repayment plan to make installment payments to their creditors over a period of 3 to 5years. Chapter 12 Bankruptcy eliminates many of the barriers that would be faced if they sought to reorganize under Chapter 11 or Chapter 13 of the Bankruptcy Code.
Chapter 12 Bankruptcy filings like Chapter 11 Bankruptcies are very complex and can be quite time consuming. If you are a farmer or fishermen considering seeking bankruptcy relief under Chapter 12 or if you are overwhelmed by debt, contact The Law Offices Of R.J.Atkinson,LLC today. Whether you live in Austin, Houston, Dallas, San Antonio, San Marcos, Waco, College Station, Bryan, Dennison, Round Rock, Georgetown, Plano, Garland, Irving, McKinney, Carrolton, Denton, Katy, Richardson, Sugarland, New Braunfels, Seguin, Humble, Boerne, Kerrville, Addison, Arlington, Victoria, Sherman, or most anywhere else in Texas, we can help you determine your eligibility to file for Bankruptcy, and can help you decide if Bankruptcy is and viable option for you or your company. Contact us for a free initial consultation.
Call Texas Bankruptcy Lawyer R.J.Atkinson: 800-436-9056