Chapter 12 bankruptcy is designed to help family farmers struggling to pay off debt. Like Chapter 11 bankruptcy, Chapter 12 is a type of reorganization bankruptcy. It allows farmers to continue operations and avoid going out of business by restructuring their debts and alleviating the financial pressures that family farmers often face. Filing for Chapter 12 bankruptcy tends to be better suited to farmers than restructuring through Chapter 13, another type of reorganizing bankruptcy. There are also debt limits when filing for Chapter 13, making Chapter 12 ideal for farmers and fishermen with significant arrears.
How to Qualify for Chapter 12 Bankruptcy
Chapter 12 bankruptcy is only for family farmers and fishermen. To file for Chapter 12, farmers and fishermen must meet these eligibility requirements:
- Own a farming or fishing business
- At least half of the filer’s income must be from the farming or fishing operation
- Have a consistent seasonal or annual income
- For farmers, the full value of their debt (secured and unsecured) cannot be more than $11,097,350, and at least half the debt must be from farm operations
One of the main benefits of filing for Chapter 12 bankruptcy as a farm owner is that it allows you to keep operating your farming business while alleviating the pressure of unpaid debt. Once you file, creditors are generally barred from collecting money you owe them. This protects your family farming operation while you work on a repayment plan.
Steps in Chapter 12 Bankruptcy
If you are a family farmer and you are considering filing for bankruptcy, here are the typical steps in the Chapter 12 process:
- File for bankruptcy – When you file for bankruptcy, the Court will place an automatic stay on debt collection efforts. Creditors won’t be allowed to contact you or sue you for the debt you owe. Farmers who file individually rather than under their business name must fulfill a pre-bankruptcy credit counseling requirement. After you complete credit counseling, you will receive a certificate, which you must include with your paperwork when you file for bankruptcy.
- The court appoints a trustee – A bankruptcy trustee will be assigned to your case. They will review your paperwork and preside over a 341 meeting of creditors.
- Attend a meeting of creditors – The 341 meeting is not an official Court proceeding and is typically held in a meeting room. The purpose is to give the trustee a chance to meet with you, verify your identity, and make sure that you qualify for Chapter 12 bankruptcy. Creditors can attend but are not required to.
- Draft and submit your Chapter 12 repayment proposal – Within 90 days, you must submit your plan to repay creditors. In general, repayment plans must operate on a three-year timeline, although the Court could extend the plan up to five years if necessary.
- Go to a confirmation hearing – Once the plan is filed, the Court will give your creditors an opportunity to object. You may have to attend a scheduled hearing. If there are any disputes over the plan, they will be considered and resolved by the judge at the hearing. Judges in bankruptcy cases tend to strongly consider the trustee’s recommendations.
- Debts are discharged – Once the Court approves it, you will begin making payments following the plan. The Court will continue to oversee your case until it is concluded. The judge will also issue a Court order that wipes out your qualifying debts.
The Chapter 12 bankruptcy process can be complicated, but an experienced Iowa bankruptcy attorney at Telpner Peterson Law Firm, LLP, can walk you through the entire process, ensure that all of your paperwork is properly filled out, represent you at the meeting of creditors and at the confirmation hearing, and protect your rights.
Contact an Iowa Farmer’s Bankruptcy Lawyer Today
If you are considering filing for Chapter 12 bankruptcy, contact an Iowa bankruptcy attorney at Telpner Peterson Law Firm, LLP, for a consultation today. You can reach our office by phone at 712-309-3738 to schedule an appointment.