Toledo Chapter 12 Bankruptcy Attorney
Experienced Toledo Chapter 12 Bankruptcy Lawyer providing Chapter 12 Bankruptcy Attorney legal needs in Toledo, Northwood, Oregon, Sylvania, Lucas County, Wood County, and the surrounding Northwest Ohio communities.
Call Lawyer, Edward Schimmel at 419.693.0911
Chapter 12 Bankruptcy for Farmers & Fishermen
Chapter 12 bankruptcy is a reorganization bankruptcy for family farmers and fisherman.
Chapter 12 bankruptcy allows “family farmers” and “family fisherman” to restructure their debts and avoid liquidation or foreclosure of their assets required to maintain operation of their business. It is similar to a Chapter 13, but offers additional benefits to debtors not available in other bankruptcies.
One such benefit only available in a Chapter 12 bankruptcy, is that that mortgages and secured claims like farm mortgages and boat loans can be modified (ie. crammed-down). Mortgage lenders must be paid at least the value of the collateral pledged for the debt. Any balance owed in excess of the collateral’s value can be treated as unsecured debt, which is often paid little or nothing. Payments on secured debt can be stretched out even beyond the term of the plan, and interest can be reduced.
To qualify to file a Chapter 12 bankruptcy, a debtor must be a family farmer or fisherman with "regular annual income". Debtors may be individuals, corporations, or partnerships.
Individual Chapter 12 debtors must meet the following criteria:
- Must be engaged in a commercial farming or fishing;
- Debts can not exceed $4,153,150 for farmers or $1,924,550 for fishermen;
- For farmers, at least 50% of total debts must be attributable to farming, or 80% of total debts for commercial fishing (excluding home mortgages); and,
- A Debtor must derive over 50% of their gross income from a farming or fishing operation.
Partnerships and corporations cannot file a Chapter 12 bankruptcy unless a single family owns more than 50% of the stock or equity interests.
Under Chapter 12 bankruptcy, the debtors must propose a plan to pay their creditors over three to five years (shorter plans are possible if repayment is accomplished prior to 3 years). A Chapter 12 plan must meet the “best interests of creditors” test, meaning that creditors must be paid at least as much under a Chapter 12 plan as they would received had the debtor filed a Chapter 7 bankruptcy. As long as the “best interests” test is met, unsecured creditors can be paid pennies on the dollar or even nothing at all.
Chapter 12 plans must be approved (“confirmed”) by the bankruptcy court. The hearing on confirmation takes place after the trustee appointed to the case reviews the proposed plan and other documents filed by the debtor, and is afforded the opportunity to make recommendations to the bankruptcy court. In the end, the bankruptcy judge is the sole decider of whether to confirm or deny a plan based on the feasibility of the proposal, and the recommendation of the trustee.
Once confirmed, the Debtors must pay all of their plan payments to the Trustee. These payments can be staggered based upon a specific season or time of year when the farmer or fisherman have income (“harvest time”). Payments cannot be missed, or a plan can be dismissed for non-payment.
A case remains open until the debtor has made all of the required payments to the Chapter 12 Trustee, after which the Court grants the debtor a discharge, and the case is closed. A discharge, with some exceptions, eliminates a debtor’s liability for obligations not paid in full under the Chapter 12 plan. Most obligations are dischargeable, but some survive a discharge, such as child support and alimony.
A Chapter 12 case can be dismissed if the debtor cannot obtain plan confirmation or make required payments. A debtor also can elect to dismiss a Chapter 12 case or convert it to a Chapter 7 liquidation.
