Chapter 12 bankruptcy is an amendment of the bankruptcy code.
There were not many bankruptcy laws that specifically protected family farmers or fishermen throughout the country’s history.
Chapter 12 bankruptcy is not often used, despite its importance.
Chapter 12 bankruptcy protection can only be granted to family farmers or fishermen with “regular annual income.” Normal yearly income can be defined as income that is steady and consistent enough to enable the debtor to make Chapter 12 repayments.
Chapter 12 Debtors can be individuals (married, single, or married), companies, and partnerships. Individual Chapter 12 Debtors must meet the following requirements:
Similar restrictions apply to farms or fishing businesses that are owned by family companies or partnerships. A single-family cannot file bankruptcy under Chapter 12 if they hold more than 50% of the equity and stock interests in a company, partnership, or partnership.
The debtor files a voluntary petition seeking relief in a Chapter 12 lawsuit. However, most of his/her responsibilities are limited to reviewing papers, giving advice to the courts, and collecting and disbursing payment.
Chapter 12 creditors must submit a repayment program within the first 90 days after filing bankruptcy. In certain cases, the bankruptcy court may extend the planned deadline.
Chapter 12 planning is similar to Chapter 13.
The confirmation hearing for Chapter 12 plans must be held by the bankruptcy court within 45 days of the plan’s filing. The trustee then makes recommendations to the bankruptcy court. Although the bankruptcy court is the ultimate authority on the approval of a Chapter 12 plan for filing, most judges heavily rely upon the trustee’s recommendations.
These components are part of a Chapter 12 Repayment Program:
Required plan payments. All “disposable Income” must be turned over to the plan administrator. “Disposable Income” is defined in Chapter 12 cases as the difference between income from fishing and farming, and the amount reasonably necessary to pay the debt.
The trustee keeps a portion as a fee and distributes the rest to creditors.
Secured claims like mortgages. Chapter 12 permits debtors to “cram down” secured debt such as farm mortgages and boat loans. In Chapter 12 cases, the secured loan payments are typically paid very little or nothing. Interest rates can also be reduced to the current market rate.
Discharge of debt. Chapter 12 debt forgiveness. Unsecured creditors may be paid cents or nothing if the “best-interest” criteria are met.
After the confirmation hearing, the case remains open until the debtor makes all payments to the Chapter 12 trustee.
Chapter 12 cases may be terminated if the debtor doesn’t receive plan confirmation or makes required payments. Debtors can also choose to convert a Chapter 12 case or make it a Chapter 7 liquidation.