Chapter 12 Bankruptcy

  • Chapter 12 cases can be filed by family farmers, family fishermen, and some corporations engaged in farming or fishing.
  • Debtors that file Chapter 12 cases have an opportunity to reorganize their farming and fishing business debts along with their personal debts including their home mortgages.
  • Debtors in Chapter 12 case can either make monthly payments or seasonal payments corresponding with their farming or fishing operations which are used to pay their creditors.
  • A standing trustee is appointed to each Chapter 12 case.  The standing Chapter 12 trustee collects the Debtor’s payments, participates in the Debtor’s case to make sure that the requirements are met and pays the Debtor’s creditors in accordance with a confirmed plan.
  • There are requirements that the Debts not exceed certain amounts in a Chapter 12 case.
  • Where specific requirements are met, Debtors can adjust the rights of secured creditors and even pay the creditor directly rather than through the standing trustee.  Chapter 12 Debtors have a greater ability to adjust the rights of certain secured creditors than Chapter 13 Debtors.
  • In some instances Debtors may be required to make payments to their unsecured creditors usually due to income or in order to retain assets in addition to those that can be protected by exemptions.
  • The Debtor files a plan.  The options available are relatively simple.
  • A plan lasts from three to five years.  For cause a Chapter 12 Debtors can have up to five years to complete their plan.
  • Creditors are expected to receive at least as much as they would receive in a Chapter 7 case.
  • A Debtor is typically permitted to retain control over business assets, funds they are owed and lawsuits the Debtor has filed against others or has the right to file against others.  Such assets are considered in determining what a Debtor is required to pay and Debtors may be required to give some or all of the proceeds of lawsuits to the trustee for the payment of creditors.
  • The Debtor may be able to retain tax refunds depending on the terms of the plan as confirmed.  The Debtor retains the option to request the ability to retain the tax refund if the circumstances make it appropriate.
  • There is some flexibility to request adjustments in payments to creditors for changes in circumstances.
  • A creditor can object to the Debtor’s plan based only on its failure to meet the requirements for confirmation of the plan.
  • A Chapter 12 plan can be dismissed but the Debtor or the Court can convert the case to a different Chapter where appropriate.
  • The attorneys fees for a Chapter 12 are higher than Chapter 7 but a portion can be paid in the Debtor’s chapter 12 plan.  The filing fee is $281.00.