Farmers have been the backbone of this country since its inception. As a result of the special place they hold in our society and economy, a specific chapter in the Bankruptcy Code was created by Congress to assist family farmers and family fishermen in reorganizing their debt. This chapter of the bankruptcy code recognizes the inherent risks associated with farming for a living including unpredictable weather and market conditions and provides a unique avenue for farmers to restructure their debt load.
Chapter 12 of the Bankruptcy Code was first included in the Bankruptcy Code as a temporary provision in 1986 and for many years its temporary nature required Congress to pass extensions in order to continue providing this relief to farmers. The 2005 amendments to the Bankruptcy Code, known as BAPCPA, made this relief for farmers permanent and added family fishermen as a category of debtors who were entitled to relief under the chapter.
Chapter 12 has the unique feature of combining both consumer and commercial bankruptcy theories that allow family farmers to restructure their debt over an extended period of time. A number of the initial qualification requirements under Chapter 12 are similar to the qualification requirements under Chapter 13 which is used by individual consumers to adjust debt. One of the first qualification requirements for an individual family farmer is to complete pre-filing credit counseling. This requirement is critical because a case is subject to immediate dismissal unless the debtor farmer has filed a certificate of completion of this credit counseling. An experienced bankruptcy attorney will be able to assist a family farmer or fisherman in obtaining this counseling prior to filing a Chapter 12 bankruptcy petition.
Qualifying for Chapter 12
To qualify to file under Chapter 12, an individual farmer or fisherman must actually be engaged in a farming or fishing operation that provides at least 50% of that person’s gross income for the preceding year or in each of the two years preceding. The farmer’s total debt cannot exceed 3.2 million dollars and at least 50% of the farmer’s debt, generally, must have arisen as a result of the farming operation. The total amounts of debt and income requirements differ slightly for family fishermen. Most farmers who find themselves in financial difficulty will usually qualify under these requirements but a bankruptcy attorney experienced in filing under Chapter 12 is needed to insure all requirements are met.
Our firm has experience in helping farmers when they are having debt problems. Please contact our office that is most convenient to you in order to discuss your options at a free initial consultation with one of our licensed attorneys.