Chapter 12 Basics

Chapter 12 bankruptcy is a unique bankruptcy provision that applies only to family farms and family fishermen. This specific type of bankruptcy is similar to Chapter 13 but is designed towards family businesses in farming and fishing to help keep these businesses alive. Chapter 12 has a higher debt ceiling than Chapter 13, which makes it a useful tool for family farmers and fishermen who have accrued large amounts of debt in their business.

To qualify for Chapter 12 bankruptcy, a family business must first meet the definition of “family farm” under the law. The total debt owed by the business must not be more than $1.5 million, and at least 80% of the debt must be related to farming or fishing. Also, for a business to file for Chapter 12, the farmer or fisherman must have earned at least 50% of his or her income from farming or fishing over the past year.

Like Chapter 13, Chapter 12 is a repayment plan bankruptcy. This means that the business must have a regular income that it can use to commit to a plan to repay its debts. The plan will include how much money the business can afford to apply towards its debts each month and how long the repayment process will take to pay back all creditors. Once this plan is approved, the family business will begin to repay debts over a period of three to five years so that they can return the business to profitability.

Contact Us

If you are a family farmer or fisherman and are struggling with business-related debts, don’t hesitate to contact the experienced New Orleans bankruptcy attorneys of Kervin & Young, LLC today at 504-599-5906.