Farming is no easy occupation. Most farmers take deep pride in their work and appreciate the unique connection that they have with the land. In addition to the grueling amount of physical labor that goes into running a farm, farm debt is also a huge problem in the United States. For farmers who are no longer able to pay their bills and who are facing insolvency, filing for a family farm bankruptcy may be an option. For help navigating the process of filing for a farm bankruptcy, call the Telpner Peterson Law Firm, LLP directly today–
What Is a Farm Bankruptcy?
As explained in the U.S. bankruptcy code, a farm bankruptcy–officially known as a Chapter 12 bankruptcy–is designed for family farmers or family fishermen who have “regular annual income.” Very similar to a Chapter 13 bankruptcy, a Chapter 12 bankruptcy is a type of reorganization bankruptcy where a farmer pays back a portion of their debts over three to five years.
Advantages of a Chapter 12 Bankruptcy
While a Chapter 12 may resemble a Chapter 11 bankruptcy in the reorganization aspect of the two bankruptcy filing types, a Chapter 12 is designed to be less expensive and more streamlined than a Chapter 11 – as such, it is specifically designed to be advantageous to family farmers and fishermen who need to successfully reorganize their debts.
Eligibility for a Chapter 12 Bankruptcy
Of course, there are certain eligibility requirements for individuals filing for a farm bankruptcy. These criteria include:
- The petitioner must be actively engaged in a farming or fishing operation;
- The total secured and unsecured debts of the operation cannot be greater than $10,000,000 (for farm operations specifically);
- For farmers, at least 50 percent of the total debts must be directly related to the farming operation; and
- More than 50 percent of the gross income of the petitioner must come from the farming operation (based on the preceding tax year, or the second or third proceeding tax years).
How a Farm Bankruptcy Works
As stated, a farm bankruptcy is a type of reorganization bankruptcy. The case is initiated at the time that the petitioner files a petition for relief. At this time, a bankruptcy trustee will be appointed.
Within 90 days of filing for bankruptcy, a debtor must file a repayment plan. The repayment plan is a strategy for repaying creditors, to the extent possible, over the next three to five years.
One interesting thing about this type of bankruptcy is that a “best interests” test is conducted before any debts are discharged. Under this test, the proposed repayment plan must meet the best interests of the creditors – which means that creditors have to be paid at least as much under this type of bankruptcy as they would receive under a Chapter 7 bankruptcy. Finally, once the three to five years have passed and all planned payments have been made, the majority of remaining obligations will be discharged. Like in other bankruptcy cases, some types of debt are not dischargeable.
Call Our Farm Bankruptcy Attorneys Today To Learn More
If you have questions about filing for bankruptcy as a farmer and what your options are when you have exhausted other strategies for organizing your finances, it’s time to talk with a lawyer. At the Telpner Peterson Law Firm, LLP, our experienced bankruptcy attorneys know how devastating being in debt is and the work that farmers put into growing food for our country. If you have questions about filing for a Chapter 12 farm bankruptcy, please call our law office today for the help and support you need.