Do I Qualify For Chapter 12 Bankruptcy And How Does It Work
- Tuesday February 15th, 2022
Many people and families in Iowa make a living through farming and other agricultural work. However, the financial pressures on individual and family farms have greatly increased in recent years. Some of these effects include commodity prices staying low and weather patterns becoming less predictable. These sustained negative effects led to a surge in bankruptcies among small farms.
There are several different ways to file for bankruptcy. The different types of bankruptcy are known as Chapters due to which section of the federal bankruptcy code to which they refer. Still, Chapter 12 bankruptcy was designed specifically with smaller farms in mind.
Several provisions arent available if you file under a different chapter as compared to filing under Chapter 12 bankruptcy. This does not mean Chapter 12 is always the right option for farmers in financial distress. However, it can be an attractive alternative to other types of bankruptcy. Keep reading to learn more or contact the Iowa bankruptcy attorneys at Telpner Peterson Law Firm, LLP for more information.
Your Guide To Chapter 13 Bankruptcy
Any bankruptcy filing comes with questions. It can be a complex process, so you need to know what to expect. If youre filing for Chapter 13 bankruptcy in Las Vegas, knowing what to expect can help you prepare and give you confidence. From our bankruptcy lawyer Nevada team, here is Chapter 13 bankruptcy explained.
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Bankruptcy Process: Filing A Chapter 12 Petition
This type of bankruptcy case starts with gathering documents and filling out paperwork. This becomes your petition that must be filed with your local court.
Your court serves the area where your family or relatives live or where the farm or fishing operation is. Spouses can file together with a joint petition or file individual petitions.
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Closing A Chapter 12 Case
A Chapter 12 case will be closed once the debtor has completed their required payments to the trustee. The court will grant a discharge that frees the debtor from liability for most debts not covered by the repayment plan. Some types of debts, such as child support and taxes, cannot be discharged under Chapter 12, which is true of other types of bankruptcy.
If the court does not approve the debtors plan, or if the debtor does not keep up with payments, the Chapter 12 case will be dismissed. Sometimes a debtor chooses to voluntarily dismiss a case when they are unsure about their ability to keep up with their obligations. They may then file under Chapter 7 instead.
Last reviewed October 2022
Types Of Claims In North Carolina Bankruptcy Cases
Claims from creditors will be categorized as priority, secured, and unsecured.
- Priority claims are given special status under bankruptcy law. Priority claims include most taxes and the cost of the bankruptcy proceeding. In general, a Chapter 13 plan must pay priority claims in full.
- Secured claims involve those with collateral , where the creditor can take back the property if the debt is not paid. In order to keep the collateral, the debtor must pay the creditor at least the value of the collateral.
- Unsecured claims are those without collateral, such as medical bills, credit card debt, and personal loans. Non-priority unsecured claims do not need to be paid in full under the plan, but projected disposable income must go toward these claims throughout the applicable commitment period. Unsecured creditors must receive at least what they would have been paid if assets had been liquidated under a Chapter 7 bankruptcy.
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Helping Hardworking Clients Rescue Their Assets In Naples Fort Myers And Port Charlotte
Chapter 12 bankruptcy is a proceeding specially designed for family farmers and fishermen. It allows you to establish a repayment plan and keep the assets youve worked so hard for. In most cases, a Chapter 12 filing may result in repaying only a percentage of what is actually owed, bringing tremendous relief and the opportunity to get your business back on track.
If your farm or fishing business is in financial trouble, you need the support of skilled Chapter 12 bankruptcy lawyers. In Florida, Miller, Hollander & Jeda has filed more bankruptcies than any other firm in the region. We have the knowledge and experience to see you through.
History Of Chapter 12
In 1986 the U.S. government added Chapter 12 to bankruptcy law through the Bankruptcy Judges, United States Trustees, and Family Farmer Bankruptcy Act of 1986. Structured similarly to Chapter 13 bankruptcy, Chapter 12 was designed to help farms and fisheries through the bankruptcy process. The U.S. government originally introduced it in the mid-1980s as a response to a debt crisis in the farming industry. As a result of downward-spiraling commodity prices, industry debt rose to approximately $216 billion by the end of 1983. Chapter 12 bankruptcy allowed farmers relief to service that debt. The act that introduced Chapter 12 was set to expire in 1993, but it was extended until it eventually become permanent law in 2005.
Prior to 1986 farmers did not always have special protection in U.S. bankruptcy laws. There were other temporary laws that offered relief, but farmers had no consistent consideration from the U.S. government. They had to file for protection under either Chapter 11, which can be very expensive and is mainly for large corporations, or Chapter 13, which is mostly for those with relatively small outstanding debtsgenerally not the case for farms and fisheries. Chapter 12 was designed to rectify those disadvantages for farmers and fishermen.
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Eligibility For Individuals And Married Couples
Only one person or married couple can file for Chapter 12 . Other eligibility requirements include:
- You or your relatives must actively engage in farming or commercial fishing
- Total debts must be $4,153,150 or less for farmers
- Total debts must be $1,924,550 or less for commercial fishermen
- 50% or more of your total income must have come from farming or fishing in the previous year
Appointment Of Bankruptcy Trustee
Your case will have an impartial trustee assigned, called a bankruptcy trustee. This person will oversee the case, administer tasks and debt repayments, and be there to answer your questions. They will evaluate your case and decide whether it is approved or not.
While this person may be helpful, they represent the bankruptcy case’s interests and not yours. Hiring a bankruptcy attorney is the only way to make sure your interests are upheld.
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How Much Do You Pay Back In Chapter 13
When following your Chapter 13 bankruptcy payment plan, youll be required to make regular payments for three to five years, depending on your income. If you make on-time payments for the duration of your plan, the rest of your debt will be discharged at the end of the term. If you opt to pay your debts off early, you may be required to pay the entirety of the debt you claimed in your bankruptcy case and youll have to get permission from the court.
Chapter 1: Bankruptcy Relief For Family Farmers
Chapter 12 of title 11 was enacted in 1986 to provide specially-tailoredbankruptcy relief for “family farmers.” Chapter 12 was originally scheduled toexpire in 1993, but the expiration was extended to October 1, 1998. A total of18,212 Chapter 12 cases have been filed since it was enacted in 1986. Theprincipal Chapter 12 issue facing the Commission, and Congress, is whether Chapter12 provides necessary relief to family farmers and should become a permanent partof the Bankruptcy Code. The Commission concluded that Chapter 12 should becomea permanent form of relief under the Bankruptcy Code. Senator Charles Grassley recently introduced legislation, The Working Family Farmer ProtectionAct of 1997 , to make Chapter 12 permanent.
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Filling Out The Bankruptcy Petition
A bankruptcy proceeding begins when a debtor files a series of forms with the court to open the case. Remember, even though you are the debtor in this case, this term is not who you are as a person. Its simply a legal distinction and you are taking proactive steps to improve your financial standing.
This set of forms asks for information about your financial situation and requests supporting documentation. If you retain a lawyer, they will review your records with you and assist in filling in the paperwork. If you choose to complete the paperwork yourself, keep in mind that court personnel cannot help you or give legal advice. See the Bankruptcy Forms section of this guide for a more detailed explanation of the filing process and the corresponding forms. It is difficult to handle a chapter 12 case by yourself and it is particularly difficult to successfully confirm an optimal plan without legal assistance.
Federal and state laws provide exemptions or provisions that legally protect your property either completely or up to a certain dollar amount from creditors. Property exemptions may only be used by individuals. Business entities are ineligible.
is an opt out state, which means you cannot use federal bankruptcy exemptions and must use the states specific rules. Under Maryland law, you can only protect certain types of property which are limited to:
|Up to $23,675 of equity in any owner-occupied real estate|
|Insurance and other benefits|
Denying The Plan At A Confirmation Hearing
If the court and its bankruptcy judge don’t confirm your plan, you will need to make changes and file a new plan. If changes cannot be made or you cannot afford them, you can change your filing to Chapter 7 instead.
If you change your mind, change the plan, or don’t make the payments, then the case can be dismissed. This is not ideal because the trustee is often able to keep some of the fees you paid. Sometimes situations change and you can’t afford the payments you were making. Creditors will protest this, so you can be proactive and talk to your trustee.
The plan can be modified anytime before or after this confirmation hearing. You, the trustee, or your creditors can request changes . Unless you work with the courts to officially change the plan, you can’t just change payments or stop paying the trustee.
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Unsecured Claims Under The Plan
You will likely not have to pay for all of the unsecured claims. These creditors are looking for you to:
- Commit as much “disposable income” as possible to your plan payments. This shows you are seriously trying to pay off your debts.
- Commit to paying back as much as possible over three years
- Pay the creditors at least as much as they would receive if you had filed for Chapter 7
So what is “disposable income” to the courts? It is any income that is not “reasonably necessary” for:
- Day-to-day living and support of you and your family
- Costs needed to operate your business day-to-day
Differences Between Chapter 11 & Chapter 12 Bankruptcy
Here are some of the major differences between Chapter 11 and Chapter 12 bankruptcy:
Debt Repayment Ã¢â¬â Chapter 12 allows debtors to cram down debts Ã¢â¬â pay the current market value of a property instead of the whole debt Ã¢â¬â on almost all secured debt. Conversely, in a Chapter 11 case, you will make all required payments in the reorganization plan until you get a discharge.
Type of Business Ã¢â¬â There are no restrictions on the type of business that can file for Chapter 11. In contrast, only farming and commercial fishing businesses can file for Chapter 12.
Bankruptcy Discharge Ã¢â¬â In a Chapter 11 case filed by LLC or corporation, the debtor receives a discharge when the reorganization plan is confirmed by the court. Conversely, in a Chapter 12 case, the debtor receives a discharge after completing all payments.
Bankruptcy Process Ã¢â¬â Filing for Chapter 11 is expensive and time-consuming. In contrast, Chapter 12 offers a quick, affordable, and predictable process for farmers and fishermen to reorganize their debts.
Flexibility Ã¢â¬â Chapter 12 offers farmers more repayment flexibility compared to Chapter 11 bankruptcy.
Debt Limits Ã¢â¬â To file for Chapter 11, your debts must not exceed $1,184,200 in secured debt and $394,725 in unsecured debt. Conversely, Chapter 12 has higher debt limits for secured and unsecured debts.
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Oct What Is Chapter 12 Bankruptcy
Chapter 12 bankruptcy is a specialized type of bankruptcy for family farmers and family fishermen with regular annual income.
This type of bankruptcy allows family farmers and fishermen in financial distress to propose a plan to reorganize their operations and pay back some or all of their debts over time
Chapter 12 is tailored to meet the needs of family farming and fishing. Many of the barriers in other types of bankruptcies are removed in chapter 12. For example, chapter 12 is less complicated and less expensive than chapter 11 bankruptcy, which is designed for large, corporate entities. Chapter 13, designed for individual wage earners or small business proprietors, has debt limits or time frames not helpful for farm or fishery reorganizations.
Elements Of The Chapter 12 Repayment Plan
The essential parts of a Chapter 12 repayment plan include the following.
Required plan payments. During the plan period, the debtor must turn over all “disposable income” to the Chapter 12 trustee. “Disposable income” in a Chapter 12 case is the difference between the revenue generated by the debtor’s farm or fishing operations and the amount reasonably needed to cover business expenses and expenses incurred in the maintenance and support of the debtor’s family.
Mortgages and other secured claims. One of the advantages of Chapter 12 is that debtors can “cram down” or reduce secured debt, like farm mortgages and boat loans. Mortgage lenders and other secured creditors must receive the value of the collateral securing the debt. Any balance owed over the collateral’s value becomes an “unsecured debt,” often paid little or nothing in Chapter 12 cases. Secured debt payments can extend beyond the plan’s term, and interest can be reduced to the current market rate.
Trustee fee. Trustees receive a percentage of the funds dispersed to creditors.
Discharge of debt. Chapter 12 plans must meet the “best interests of creditors” test. Under the “best interests” test, creditors must receive at least as much under a Chapter 12 plan as they would in Chapter 7 bankruptcy. As long as the plan meets the “best interests” test, unsecured creditors can be paid pennies on the dollar or nothing at all.
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How Could A Bankruptcy Lawyer Help Me
A bankruptcy attorney can help by looking at your debts and other factors to determine if Chapter 12 bankruptcy is right for you. For example, chapter 12 may not be the best option for your situation if you have massive debts and no realistic way to repay them. In this case, a Chapter 7 bankruptcy may be a better option.
Additionally, a lawyer can help you prepare your Chapter 12 bankruptcy petition and make sure everything is in order. Youll want to be sure you have the necessary financial information showing youre eligible for Chapter 12 bankruptcy. Any mistakes or other issues could result in your petition being denied.
Finally, a bankruptcy lawyer can walk you through the process and help stave off your creditors. There will likely be several court hearings as your case progresses. Your creditors will have a chance to argue for more money or that your petition should be denied. A bankruptcy lawyer can help you fight back against your creditors and create a repayment plan thats realistic and within your means.
What Creditors Need To Know About Chapter 12 Family Farmer Bankruptcy
Lenders who havent yet fallen victim to the increasing number of Chapter 12 or family farmer bankruptcies are likely to see that circumstance change in the near future. Chapter 12 bankruptcy filings have been on the rise for several years in Kansas, up from two total filings in 2015 to roughly 35 in 2019. For the last law few years, Kansas has been among the states with the highest number of Chapter 12 filings. Given the current market scenario for farmers, Chapter 12 filings are expected to remain high or increase over the next year.
So, what is different about a Chapter 12 bankruptcy? The goal of Chapter 12 was to provide a bankruptcy option for family farmers and fishermen that eliminated many of the hurdles of reorganization found in Chapters 13 and 11 . In theory, Chapter 12 is less expensive than Chapter 11 . And, Chapter 12 doesnt have the same debt limitations of Chapter 13, since farmers typically have higher debts than a typical individual wage-earner.
Typically then, the disputes that arise in Chapter 12 plans are with secured creditors and are over the value of the secured collateral the feasibility of debtors proposed plan of reorganization and the timing of payments, including extension of the original payment term. Unsecured creditors often object to the debtors stated disposable income.
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Clients Often Choose To Work With The Sasser Law Firm Because We Provide:
- Attorney accessibility. At Sasser Law Firm your consultation and signing appointments will be with an attorney and throughout your North Carolina chapter 13 bankruptcy case, the firms attorneys are accessible.
- Thorough case evaluations. Our North Carolina attorneys will review your household income, assets, expenses, and the kind of debt you have to determine what your options are.
- Honesty and integrity. We will be straightforward about whether we think filing for bankruptcy is right for you. This is a big decision, and we will not pressure you into making a move you are not comfortable with. We will also tell you if we dont think bankruptcy is appropriate based on the fact.
- Estimated repayment amount. Our goal is to project as closely as possible what the final Chapter 13 repayment amount will be based on the facts we are provided. We also aim to make the Chapter 13 plan payment as short and as low as possible.
- Quick action. To protect against the foreclosure of a home or vehicle repossession, we often file Chapter 13 bankruptcy cases on an expedited basis sometimes on the very day, a client first walks in the door.
- Tenacious representation. Some chapter 13 cases are filed, confirmed, performed, and discharged without difficulty. But if issues arise during the case we will fight for you. Plan confirmation does not end our involvement in seeking to represent you and assist you.