Bankruptcy for farmers

If you farm you know that times can be tough.  Weather, unstable crop prices, equipment failure, price of fuel, crazy government regulations – the problems you deal with everyday can seem endless and overwhelming at times.  Sometimes you just need a little bit of help to restructure the operation so you can make ends meet.  That where Chapter 12 bankruptcy might be useful.  Chapter 12 Bankruptcy provides a type of debt reorganization for individuals or partnerships classified as “family farmers” or “family fishermen”. Chapter 12 is nearly identical to Chapter 13 bankruptcy in that it involves drafting a plan to repay debts over the course of a three to five year period. However, Chapter 12 Bankruptcy includes several provisional differences that specifically address needs unique to owners in the farm and fishing industries.

The key advantage of Chapter 12 Bankruptcy for farmers and fishermen is the allowance of a higher debt ceiling than is provided by Chapter 13. This higher ceiling is required due to the fact that owners of farm or fishing businesses will typically incure much higher debts than the average wage-earner. While the corporate-oriented Chapter 11 option also has higher limits, it is far more complex and much more expensive to file than Chapter 12 Bankruptcy.

To file for Chapter 12 Bankruptcy relief, an individual classified as a family farmer or fisherman must meet criteria including the following key points:
-You must currently be engaged in a farming/fishing operation
-Total unsecured and secured debts of the operation shall not exceed $3,237,000 (adjusted annually)
-At least 80% of your fixed-amount debts must relate to your farm or fishing business
-Over 50% of your gross income for the preceding tax year must have been raised by the farming/fishing operation
-A husband and wife for instance, may file a single joint petition. A partnership may file corporately, but will be subject to additional qualifications, which include:
-Over 50% of outstanding stock/equity in the partnership must be held by one family
-This family must conduct actual farming operations
-The farming operation may not issue publicly traded stock

In terms of farm operations, you will remain in control of your farm. While Chapter 12 mandates the assignment of a court-appointed Trustee the control of day-to-day operations remains in the hands of the debtor. In Chapter 12 cases, the Trustee’s function is limited to financial oversight. The Trustee is responsible for making recommendations regarding Chapter 12 dischargeability, exchanging information with interested parties, verifying that the debtor will be able to make payments on time, etc.

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