Chapter 12 Bankruptcy 

 

Chapter 12 Bankruptcy- Family Farmers and Family Fisherman

Chapter 12 enables financially distressed family farmers and fishermen to propose and carry out a plan to repay all or part of their debts. Under chapter 12, debtors propose a repayment plan to make installments to creditors over three to five years. Generally, the plan must provide for payments over three years unless the court approves a longer period “for cause.” But unless the plan proposes to pay 100% of domestic support claims (i.e., child support and alimony) if any exist, it must be for five years and must include all of the debtor’s disposable income. In no case may a plan provide for payments over a period longer than five years. 11 U.S.C. § 1222(b)-(c).

In tailoring bankruptcy law to meet the economic realities of family farming and the family fisherman, chapter 12 eliminates many of the barriers such debtors would face if seeking to reorganize under either chapter 11 or 13 of the Bankruptcy Code. For example, chapter 12 is more streamlined, less complicated, and less expensive than chapter 11, which is better suited to large corporate reorganizations. In addition, few family farmers or fishermen find chapter 13 to be advantageous because it is designed for wage earners who have smaller debts than those facing family farmers. In chapter 12, Congress sought to combine the features of the Bankruptcy Code which can provide a framework for successful family farmer and fisherman reorganizations.

The Bankruptcy Code provides that only a family farmer or family fisherman with “regular annual income” may file a petition for relief under chapter 12. 11 U.S.C. §§ 101(18), 101(19A), 109(f). The purpose of this requirement is to ensure that the debtor’s annual income is sufficiently stable and regular to permit the debtor to make payments under a chapter 12 plan. But chapter 12 makes allowance for situations in which family farmers or fishermen have income that is seasonal in nature. Relief under chapter 12 is voluntary, and only the debtor may file a petition under the chapter.

Under the Bankruptcy Code, “family farmers” and “family fishermen” fall into two categories: (1) an individual or individual and spouse and (2) a corporation or partnership. Farmers or fishermen falling into the first category must meet each of the following four criteria as of the date the petition is filed in order to qualify for relief under chapter 12:

  1. The individual or husband and wife must be engaged in a farming operation or a commercial fishing operation.
  2. The total debts (secured and unsecured) of the operation must not exceed $4,153,150 (if a farming operation) or $1,924,550 (if a commercial fishing operation).
  3. If a family farmer, at least 50%, and if family fisherman at least 80%, of the total debts that are fixed in amount (exclusive of debt for the debtor’s home) must be related to the farming or commercial fishing operation.
  4. More than 50% of the gross income of the individual or the husband and wife for the preceding tax year (or, for family farmers only, for each of the 2nd and 3rd prior tax years) must have come from the farming or commercial fishing operation.

In order for a corporation or partnership to fall within the second category of debtors eligible to file as family farmers or family fishermen, the corporation or partnership must meet each of the following criteria as of the date of the filing of the petition:

  1. More than one-half of the outstanding stock or equity in the corporation or partnership must be owned by one family or by one family and its relatives.
  2. The family or the family and its relatives must conduct the farming or commercial fishing operation.
  3. More than 80% of the value of the corporate or partnership assets must be related to farming or fishing operation.
  4. The total indebtedness of the corporation or partnership must not exceed $4,153,150 (if a farming operation) or $1,924,550 (if a commercial fishing operation).
  5. At least 50% for a farming operation or 80% for a fishing operation of the corporation’s or partnership’s total debts which are fixed in amount (exclusive of debt for one home occupied by a shareholder) must be related to the farming or fishing operation.
  6. If the corporation issues stock, the stock cannot be publicly traded.

Southern Utah Chapter 12 Bankruptcy Attorney

Nate Reeve is a seasoned bankruptcy attorney here at Ruesch & Reeve PLLC, he has years of experience and has filed thousands of bankruptcy cases in Utah.  From effectively providing insight regarding your rights, helping you understand the basics, and protecting your rights through the entire process giving our clients the very best advice and peace of mind during this difficult time.

Is Bankruptcy Right for Me?

Deciding whether to file for bankruptcy and what type of bankruptcy, will depend on your financial circumstances and goals. There are three types of bankruptcy we explore with each client during our initial consultation. Chapter 7 offers a way to discharge and eliminate debt but may require the surrender of some assets. Chapter 13 (for individuals) and Chapter 11 (for businesses) involve the reorganization and repayment of debt under the protection of the bankruptcy court.

When you file for bankruptcy, an automatic stay is placed on all collection efforts against you. This can put an immediate stop to:

  • Creditor contact and harassment
  • Foreclosure
  • Creditor lawsuits
  • Wage garnishment
  • Car repossession
  • Sheriff’s sales

Ruesch & Reeve PLLC can guide you through your bankruptcy options so that you know every advantage and disadvantage of bankruptcy when deciding if bankruptcy is right for you.

Read more about Bankruptcy

Read more about Chapter 7 Bankruptcy

Read more about Chapter 13 Bankruptcy

Read more about Chapter 11 Bankruptcy

Read more about Chapter 15 Bankruptcy

Read more about Chapter 9 Bankruptcy

Bankruptcy Myths

With new laws it's not worth it to file for bankruptcy

False. The new law effective October 2005 allows you to quality for a Chapter 7 bankruptcy if your household income is less than your state’s median, or if you pass a “Means Test” to see if you have qualifying, low disposable income.

I have to have a large amount of debt before qualifying for bankruptcy

False. The question to ask is, “Is my debt load overwhelming compared to the amount of disposable income I currently have?”

I will lose everything I own including my car and home

False. Every state has exemptions which allow you to keep bare necessities. Insert link to info below in red. A place to live and a way to drive to work could be considered bare necessities.

It will take at least seven to ten years for my credit to recover from bankruptcy

False. Even with a bankruptcy showing for up to ten years, you can begin to build credit immediately after filing. The national average shows credit can be recovered in as little as eighteen months.

Everyone will think I'm a bad person if I file for bankruptcy

False. Someone must specifically be searching for your bankruptcy to find it in the public record. Always remember that bankruptcy provides relief. It is not a punishment demanded by your creditors. Law makers enacted laws to allow people to financially have a fresh start.

After I file for bankruptcy creditors can still garnish my wages

False. In Chapter 7 bankruptcies any wages you earn after the filing are yours to keep. Chapter 13 bankruptcy includes a pre-approved plan to pay off debt over a specific amount of time. In this case part of your earnings will be applied to your debts.

The following is a list of property that is generally exempt from seizure or collection under Utah law

  (see Utah Code §§78B-5-50378B-5-50578B-5-50678B-5-508):

 

  • Burial plot for you or anyone in your family(see Utah Code § 78B-5-505(1)(a)(i));
  • Health aids that are reasonably necessary (see Utah Code § 78B-5-505(1)(a)(ii));
  • Public Benefits such as General Assistance, Social Security, Disability, Unemployment, Worker’s Compensation(see Utah Code 78B-5-505(1)(a)(iii));
  • Benefits used for medical, surgical, or hospital care for you and your dependents (see Utah Code 78B-5-505(1)(a)(iv));
  • Veterans Benefit(see Utah Code 78B-5-505(1)(a)(v));
  • Child Support (see Utah Code 78B-5-505(1)(a)(vi));
  • Alimony and separate maintenance (see Utah Code 78B-5-505(1)(a)(vii));
  • Money or assets in a Qualified Domestic Relations Order (QDRO) (see Utah Code 78B-5-505(1)(a)(xv));
  • One clothes washer & dryer, refrigerator & freezer, stove & microwave, and sewing machine (see Utah Code 78B-5-505(1)(a)(viii)(A));
  • All Carpets in use at your house (see Utah Code 78B-5-505(1)(a)(viii)(B));
  • Food and other provisions sufficient for 12 months for you and your family (see Utah Code 78B-5-505(1)(a)(viii)(C));
  • Clothing that is reasonably necessary (not including jewelry or fur coats) (see Utah Code 78B-5-505(1)(a)(viii)(D));
  • Beds and bedding for you and your immediate family (see Utah Code 78B-5-505(1)(a)(viii)(E));
  • Artwork depicting or produced by you or immediate family (unless such artwork is held as part of a trade or business) (see Utah Code 78B-5-505(1)(a)(ix));
  • Insurance proceeds, judgment, or settlement that are compensatory for bodily injury or wrongful death to you or to someone for whom you are or were a dependent (see Utah Code 78B-5-505(1)(a)(x));
  • Cash value of Life insurance policy (see Utah Code 78B-5-505(1)(a)(xi),(xii),(xiii));
  • Pensions, IRA, 401(K) plans and retirement plans (see Utah Code 78B-5-505(1)(a)(xiv));
  • Sofas, chairs, and related furnishings reasonably necessary for one household, up to a total value of $500 (see Utah Code 78B-5-506(1)(a));
  • Dining and kitchen tables and chairs reasonably necessary for one household, up to $500 per debtor (see Utah Code 78B-5-506(1)(b));
  • Animals, books, and musical instruments, up to a total value of $500 (see Utah Code 78B-5-506(1)(c));
  • Heirlooms or other items of “particular sentimental value” up to a total value of $500 (see Utah Code 78B-5-506(1)(d));
  • Implements, professional books, or tools of your trade, all having a total value not exceeding $3,500 (see Utah Code 78B-5-506(2));
  • Motor vehicle (1) not exceeding $2,500 in value, used primarily for daily transportation, and not used for recreational purposes (see Utah Code 78B-5-506(3)(a)(b));
  • Cars with equity up to $2,500 (see Utah Code 78B-5-506(3)(b));
  • House or primary personal residence with equity up to $20,000 per debtor (see Utah Code 78B-5-503(2)(a)(ii));
  • Real property that is not primary personal residence with equity up to $5,000 per debtor (see Utah Code78B-5-503(2)(a)(i));

The law office of Ruesch& Reeve is hands down the best law firm in town. They were very friendly, gave me all the details on how they would handle my situation which made me feel secure in how they were going to handle my situation.

Tim S

Nate Reeve and his staff helped my husband and I through the bankruptcy process in the most caring and professional manner. He prepared us for every phase and was available when we had questions.

Dan F

A great and trustworthy company. Definitely recommend. Ruesch and Reeve explained all the steps very clearly and communication is always quick and concise.

Makenzie H

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