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What is Chapter 12 Bankruptcy?

Posted on in Bankruptcy

What is Chapter 12 Bankruptcy?

You know about Chapter 7 bankruptcy and Chapter 13 bankruptcy. These are the two types of bankruptcy that individuals facing substantial personal debt can file to take control of their debt. Other types of bankruptcy exist too, like Chapter 11, Chapter 9, Chapter 12, and Chapter 15. Most people are familiar with Chapter 11 bankruptcy because it is frequently discussed in the news. Chapter 11 bankruptcy allows struggling businesses to reorganize in an effort to become profitable again.

Chapters 9, 12, and 15 are the types of bankruptcy that we do not often hear about. These types of bankruptcy are filed less frequently than the other three because the circumstances that put individuals in positions to file them are less common. For example, Chapter 12 bankruptcy is known as Family Farmer Bankruptcy or Family Fisherman Bankruptcy. This type of bankruptcy is designed for individuals who make their income through small-scale farming or fishing.

What is Chapter 12 Bankruptcy?

Chapter 12 bankruptcy provides family farmers and fishermen with the opportunity to develop repayment plans to repay their debts. In this way, it is similar to Chapter 13 bankruptcy. Typically, repayment plans under Chapter 12 last three to five years. Chapter 12 bankruptcy differs from Chapter 13 because it is a simpler, more streamlined process.

Who Can File for Chapter 12 Bankruptcy?

There are two categories of farmers and fishermen who can file for Chapter 12 bankruptcy:

  • Individuals, either single or married; and
  • Corporations and partnerships.

The requirements vary depending on the category into which a claimant falls. Individuals and married couples who file for Chapter 12 must meet the following requirements:

  • They must work in a farming or fishing operation;
  • For a fishing operation, the total debt must not exceed $1,868,200. For a farming operation, the debt must not exceed $4,031,575;
  • For a farmer, at least 50% of the total fixed debt must be related to his or her operation. For a fisherman, this figure must be at least 80%; and
  • More than 50% of their gross income must come from their fishing or farming operation.

For corporations and partnerships, the following rules apply:

  • More than 50% of the outstanding stock or equity in the corporation or partnership must be owned by one family or a family and its relatives;
  • More than 80% of its corporate assets must be related to fishing or farming;
  • The family or the family and its relatives must be the ones who perform the fishing or farming work;
  • For a fishing operation, the total debt must not exceed $1,868,200. For a farming operation, the debt must not exceed $4,031,575;
  • If the corporation issues stock, the stock must not be publicly traded; and
  • For a farmer, at least 50% of the total fixed debt must be related to his or her operation. For a fisherman, this figure must be at least 80%.

Work with an Itasca Bankruptcy Attorney

To learn more about Chapter 12 and other types of bankruptcy, contact our team of experienced Itasca bankruptcy lawyers at Newland & Newland, LLP. Our office is in the prestigious 180 North LaSalle street building in Chicago. We serve clients in Arlington Heights, Libertyville , Waukegan, Itasca and Chicago. Contact us today to set up your initial legal consultation.

(photo courtesy of Jan Fidler)

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