Chapter 12 Bankruptcy
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Chapter 12 bankruptcy is intended for family farmers and family fishermen with "regular annual income". This was designed to aid financially distressed family farmers and fishermen to propose and carry out a plan to repay all or part of their debts. Generally, this plan proposes a repayment plan to make installments to creditors over three to five years.
Family farmers and fishermen are designated to one of two categories. The first category includes an individual or an individual and his or her spouse. The second includes corporation and partnerships.
For individuals, and individuals and spouses, seeking relief under Chapter 12 of the Bankruptcy Code, there are specific criteria which must be met. Also, corporations and partnerships seeking relief under Chapter 12 of the Bankruptcy Code must meet specific criteria:
1)The individual or husband and wife must be engaged in a farming operation of a commercial fishing operation.
2)The total debts (secured and unsecured) of the operation must not exceed $3,544,525 (if farming operation) or $1,642,500 (if a commercial fishing operation).
3)If a family farmer, at least 50 percent, and if family fisherman at least 80 percent, of the total debts that are fixed in amount (exclusive of debt for the debtor\'s home) must be related to the farming or commercial fishing operation.
4)More than 50 percent of the gross income of the individual or the husband and wife for the preceding tax year (or, for family farmers only, for each of the 2nd and 3rd prior tax years) must have come from the farming or commercial fishing operation.
For a corporation or partnership to fall within the second category of debtors, the corporation or partnership must also possess specific criteria.
1)More than ½ of the outstanding stock of equity in the corporation or partnership must be owned by one family or by one family and its relatives.
2)The family or the family and its relatives must conduct the farming or commercial fishing operation.
3)More than 80 percent of the value of the corporate or partnership assets must be related to the farming or fishing operation.
4)The total indebtedness of the corporation or partnership must not exceed $3,544,525 (if farming operation) or $1,642,500 (if a commercial fishing operation).
5)At least 50 percent for a farming operation of 80 percent for a fishing operation of the corporation\'s or partnership\'s total debts which are fixed in amount (exclusive of debt for one home occupied by a shareholder) must be related to the farming or fishing operation.
6)If the corporation issues stock, the stock cannot be publicly traded.
A debtor or debtors seeking relief under Chapter 12 must file a petition with the bankruptcy court. The debtor's repayment plan for debts must be submitted to the court within 90 days of his or her petition filing. The debtor or debtors are typically required to provide information pertaining to assets and liabilities, current income and expenses, unexpired leases and contracts, and a statement of financial affairs.
The debtor or debtors must also provide the court with other information to complete the entire petition. According to the U.S. Courts, this information includes a list of creditors and the amounts of their claims, the debtor's income information, a list of the debtor's property, and a thorough list containing the debtor's monthly farming and living expenses.
Under the new Bankruptcy Law, effective since October 17, 2005 , there is a case filing fee and an administrative fee for those seeking relief under Chapter 12 of the Bankruptcy Code. According to the administrator of the U.S. Courts, the filing fees total $239 for Chapter 12 bankruptcy.
Most collections will cease when the debtor files a petition for Chapter 12 Bankruptcy. The court will appoint an impartial trustee to oversee the case. The trustee will arrange for the debtor and all of the creditors to meet. At this meeting the creditors are allowed to ask the debtor questions pertaining to his or her financial situation and repayment plan.
In most Chapter 12 bankruptcy cases, the debtor will only pay a portion of his or her debt. Creditor's claims are divided into three different categories, including priority claims, secured claims, and unsecured claims. Under Chapter 12 bankruptcy, all priority claims must be paid in full unless there is an agreement that states otherwise. Unsecured claims do not have to be paid in full. Secured claims are paid with the collateral set forth for the debt.
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