Farming is a grueling profession. Amazingly, before , farmers did not have any special form of reorganization to recognize their unique contributions to the economy and their unreliable streams of income. Fortunately, Chapter 12 provides family farmers and family fishermen with specially designed, more flexible year payment plans to adjust debts and emerge in stronger financial shape.
In Chapter 12, a bankruptcy trustee is appointed to oversee your case and report to creditors. Trustees also act as gatekeepers to make sure plans comply with the Bankruptcy Code, our rules on how bankruptcies work. Chapter 12 debtors receive the benefit of the bankruptcy automatic stay, which prevents creditors from taking any actions to collect a debt โ like repossessing property, garnishing wages, or forcing a debtor to appear in state court to defend a lawsuit โ without court permission.
And since the stay lasts for the life of the bankruptcy, unless a creditor gets court approval to lift the stay, you can enjoy peace from your creditors for months at a time. Once the bankruptcy is completed, a debtor will receive an order from the bankruptcy judge discharging all debts that can be eliminated. Long-term debt like farm real estate and equipment debt will then be paid directly. Our clients choose Chapter 12 cases for two main reasons: 1 They are farmers and want to continue farming.
Often this land has been passed on through generations and they want to keep the land in the family name. Unfortunately, a rough year or few years means there is not enough cash flow to service debt and allow the farming operation to thrive or survive.
Many are facing a threat of foreclosure of their land or repossession of equipment they need to farm. Selling now, while land is valuable, would mean a hefty tax bill and more money troubles. However, Chapter 12 has unique rules that let some sales proceed while the gains are treated as unsecured debts โ debts that can be discharged in the bankruptcy. All Chapter 12 individual clients have to complete a pre-fling and a post-filing online credit counseling course and everyone must appear once at a Meeting of Creditors required by the Bankruptcy Code.
