Chapter 12 Bankruptcy, When To File For It
There are various types of chapters in the bankruptcy code that cater for different needs of the consumer. The chapter that caters for family farmers and fishermen is Chapter 12. It helps financially troubled farmers and fishermen propose a way in which they can repay debts. Debtors propose a repayment plan to repay installments to the creditors for a period between three to five years.
To qualify to be in the family farmer bracket, there are several tests that have to be met. One test is that the farmer’s debt may not be more than 1.5 million US dollars, and at least 80% of the debt should be farm-related. If there is debt on the home, it is not included unless there is a connection to the farm operations. The other requirement is that the farmer debtor has to have earned at least half of his gross income from farming, in the year preceding filing of the petition.
The farmer is also required to have a regular and steady annual income. This is to enable him make regular payments under the chapter 12 plan. This type of bankruptcy gives allowance for family farmers and fishermen who have proceeds that come in according to the seasons. Since relief under this chapter is on a voluntary basis, only the debtor can file under this chapter.
Farmers and fishermen normally faced problems when they filed for bankruptcy. So in 1986, Chapter 12 bankruptcy was created to remove these obstacles. This is because it was expensive or complicated to restructure under chapter 11 or 13 of the bankruptcy code. After completion of the repayment under the chapter 12 plan, the debtor normally gets a discharge.
Questions and Answers
Did you know that there is a special provision in the bankruptcy code just for family farmers? It's called a chapter 12 bankruptcy and it has many benefits just for farmers.
Chapter 12 bankruptcies were designed to handle the farm financial crisis that occurred in the 1980s. Prior to that time, farm bankruptcy was relatively unheard of because they were few.
Chapter 12 or the family farmers or family fishermen is a repayment plan for farmers and fishermen with regular incomes. It may not be restricted to farmers and fishermen only since it may also cut across partnerships and corporations.
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Due to the economic slump the country has faced over the last several years, many people have found themselves behind on major payments or unable to pay for things in general, even with a steady income. If you find yourself in a tough financial situation due to economic setbacks like job loss, illness or unexpected expenses, filing chapter 13 bankruptcy can often provide relief.
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