Do I Qualify for Chapter 12 Bankruptcy?

In most of our blog posts, we discuss the two types of bankruptcy that help individuals work through their personal debt – Chapter 7 and Chapter 13. These are not the only bankruptcy chapters that one can file – there are also Chapter 7, Chapter 9, Chapter 11, Chapter 12, Chapter 13, and Chapter 15.

Chapter 12 bankruptcy is a relatively new type of filing. It was created in the 1980s to aid family farms and commercial fishing operations that struggled with business debt. If you make your livelihood as a farmer or commercial fisher, compare Chapters 11 and 12 to determine which type of bankruptcy is best for your business.

Determine Your Chapter 12 Eligibility

In order to file for Chapter 12 bankruptcy, you must meet the following qualifying criteria:

• Work on a family farm or with a commercial fishing company;
• Earn at least 50% of your annual gross income from your work with the farm or fishing company;
• Have no more than $4,153,150 in total debt if you operate a family farm or $1,924,550 if you operate a fishing operation; and
• Owe 50% or more of this debt directly because of your farming activities or 80% or more of the debt directly due to commercial fishing activity. This excludes the mortgage on the filer’s home.

You can file for Chapter 12 as a single individual, a married couple, a partnership, or a corporation. If you file as a partnership or corporation, though, you or your family must own 50% or more of the farm or fishing operation’s stock or equity interests.

Differences Between Chapter 12 and Other Bankruptcy Chapters

Like Chapter 13, Chapter 12 bankruptcy involves a repayment plan that makes it possible for the filer to repay his or her debt over the course of three to five years while under a court trustee’s supervision. Aside from the qualifying professions for Chapter 12, there are a few other key differences between Chapter 12 and Chapter 13. These include:

• Higher debt limits for Chapter 12 filers; and
• Greater flexibility for filers due to the seasonal nature of their work.

Some individuals who consider filing for Chapter 12 also consider filing for Chapter 11, the bankruptcy chapter designed for struggling businesses. Many family farmers and fishing operations choose Chapter 12 over Chapter 11 when they qualify because it is a less expensive, less complicated process.

Work with an Experienced Merrillville Bankruptcy Lawyer

An experienced bankruptcy lawyer can help you determine which chapter is right for your case and help you prepare for the bankruptcy process by working with you to gather all the documents you need to submit to the court and preparing with you. To learn more about the different bankruptcy chapters, which is best for your case, and additional considerations to make before you file for bankruptcy, schedule a legal consultation with Whitten & Whitten