Chapter 12 bankruptcies are designed for family farmers with regular annual income. It enables financially distressed family farmers to propose and carry out a plan to repay all or part of their debts. In Chapter 12 farm bankruptcies, farmers propose a repayment plan to make installment payments to creditors over three to five years. Generally, the plan must provide for payments over three years unless the court approves a longer period.
The goals of farm bankruptcies include:
1. Discharge of Debts
2. Relaxation of Repayment Terms
a. Increase length of time for repayment;
b. Decrease interest rate; and/or
c. Decrease annual debt service requirements.
3. Protection for the Debtor
a. Automatic stay protects Debtor from creditors’ collection activities; and
b. Allows Debtor time to evaluate available options.
4. Preservation of Exempt Assets
a. Machinery, Livestock & Feed for Livestock
5. Tax Avoidance
a. Avoid payment of taxes on a gain realized by the sale of agricultural assets that were primarily used in the farming operation.
For more information on farm bankruptcies, please contact Charles Smith or Nicole Hughes at Telpner, Peterson, Smith, Ruesch, Thomas & Simpson, LLP today at 712-309-3738.