Chapter 12 bankruptcy is akin to chapter 13. Its based on the concept of providing the debtor with another chance of repayment, while allowing him to keep his primary means of livelihood, i.e. his business, alive and running.
Chapter 13 is meant for individuals. But the farmers, fishermen (of every type) work under harsher conditions in an unorganised sector. As they toil in the personal capacity in an industry which is unorganised yet needs constant capital, they require special bankruptcy chapters which give them more leeway.
What is chapter 12 bankruptcy?
Chapter 12 farm reorganization is the process by which the distressed debt of farmer/fishermen family (which is quite common with the fury of nature)is paid back partially. What happens once the court discharges chapter 12 bankruptcy? The debts which have been paid partially as per plan, are no more considered as a liability of the petitioner.
Filing for chapter 12
Chapter 12 is designed to hive off the debt of farmers and fishing community. Normal individuals who have no such commercial needs cannot file a chapter 12. For this commercial angle, Chapter 12 has a higher debt limit, until till which the bankruptcy petition can be filled.
Chapter 12 and 13 comparisons
Comparison between debt limit of Chapter 12 and Chapter 13 will prove the above point. To be eligible for chapter 13 your secured debts cannot cross $807,750, and your unsecured debts cannot go above $269,250. Compare it with the limits available for chapter 12 filers, mentioned in this article later, and you will notice the debt level difference.
So, what is the eligibility to file for chapter 12? Most of your income should come from direct activity of farming or fishing, respectively.
Chapter 12 bankruptcy process requires your primary occupation to be farming or fishing. 50% of the debt, in the case of farming, should come from that sector. 80% of your debt should come from commercial activities related to fishing if you want to petition as a bankrupt fisherman.
In both cases, 50% of your revenue should come from farming and fishing activities.
If the entity wants to petition as a farmer, his cumulative liability (secured and non secured) should not cross 3,237,000 dollars. However, debt for housing mortgage is not included in this limit.
Chapter 12 bankruptcy process
In the case of fisherman applying for relief, his debt arising out of commercial fishing activities should not exceed 1,500,000 dollars at the time of petition filing.
The cumulative annual as well as monthly income all through the year, including the seasons when income becomes traditionally lower in respective sectors, should be enough to sustain the instalments of payments as pre-planned in your case of bankruptcy.
List all your incomes, especially from the farming and commercial fishing activities and all your expenses, divided neatly into farming or fishing operation related activities in one group under appropriate subheadings and household expenses in another group with your repayment plan. The judge will decide on these given income and expenses details to determine the viability of your plea.
Within 90 days of petition filling in the local bankruptcy court, you have to submit the detailed repayment plan vetoed by the lenders. The court will decide whether you have the required value to be able to pay off the creditors. Chapter 12 guidelines will determine the amount paid to each creditor.
A bankruptcy attorney is mandatory to the plan to be submitted to the court. It is not mandatory to hire a bk attorney as per law, rather as per the situation. Without bankruptcy attorney, you will not be able to understand how to maximise your exemption list nor draft the plan to be submitted.
Attorney Fees for filing bankruptcy under chapter 12
Chapter 12 bankruptcy attorney fees vary with the nature of the case. Uncomplicated cases cost around 1500 $. But that is seldom the case. Typically, fees vary between 5000 to 10,000 $. If you find this a tough to accommodate, as you are already down under, check the “Contingency fee” available from most of the bankruptcy attorneys. Here, you pay the pe determined fees at the end of successful discharge of your case. No settlement means no payment.
Chapter 12 plan is the detailed proposal showing how you will be paying off your debts from the income you are likely to receive. This is usually spread over a period of 3 to 5 years. The bankruptcy judge will pore over your plan and your revenue history, your non-exempt assets, their market values, your per month operational and household expenses. If the court is satisfied with your future roadmap, then your chapter 12 is on its way. Else you have to refile it or go for chapter 7.
No farmer or fishermen, as individuals, want to file for chapter 12 bankruptcy cases. If they are allowed to, they prefer chapter 13. However, even slightly higher debt level than that allowed for in 13, forces them to take the chapter 12 route. Chapter 12 is meant primarily to allow the farmers and fishermen, who are individual of non-business-category, to carry on with their primary activity. This will help to slowly heave off the liabilities with income from his primary activity.
Just like chapter 7 and chapter 13, one redeeming feature of 12 is the automatic stay from the day of filing of the petition in court. Any foreclosure, repossession process, lawsuits regarding non-payment, phone calls of recovery agents automatically stop as per law. The automatic stay on recovery process can only restart only if is allowed by the court. In most of the cases, the automatic stay remains in place until the judge decides on the fate of the proposal submitted.
Chapter 12 trustee board is mandatory for every case. You have to convince them that your case is fit for bankruptcy relief of this type. You will also hand over each instalment of debt repayment to the trustee board. The board has an important job of fairly distributing it among your secured and non-secured lenders.
The repayment plan favours the secured lenders. They get the value of mortgage kept as collateral against their loan, at the minimum. Non-exempt assets are liquidated to pay the secured creditors. Disposable income per month pays the non-secured lenders. They get the same amount as chapter 7 at least.
Pros and cons of filing chapter 12 bankruptcy
Let’s study the pros and cons of chapter 12. Chapter 12 is meant to satisfy the commercial borrowings that a farmer or fisherman has to undertake to keep on with his activities. The higher debt limit has been incorporated thoughtfully. This ensures that the farmers or fishermen can go on with their principal activity, which will hopefully pay them good dividend in return. We stress on the commercial part because that is normally higher than personal loans we are accustomed to. However, Chapter 12 discharge is not as quick as chapter 7 and is much costly.
Chapter 7 is relatively easy to plan, with the listing of your exempt and non-exempt assets versus the liability. In chapter 12 itemized listing of all creditors with their identities, your commercial operations expenses, revenues along with household expenses, have to be done. This is infinitely more complex and take a hell lot of time and costly. However the faster and simpler Chapter 7 strips you of all such assets that you are allowed to keep in chapter 12. Chapter 12 essentially lets you take another shot at reorganising your farming or fishing operations, to make it more profitable. Chapter 7 allows you the basic lifestyle without your business assets.
Why to hire David Galler as your farm and fisherman bankruptcy attorney?
Having done all the explanation, let us introduce ourselves. I am David Galler, founder of Galler Law, LLC in Atlanta, State of Georgia. What differentiates us from other bankruptcy law firms is the attention we pay to each client and his case. We offer personalised advice, backed by our experience of 27 years in this field of Chapter 7,13 and 12 bankruptcy. If you are in trouble, turning into a candidate for repossession, foreclosure or potential lawsuits, call us at (770) 671-8830. Visit us, and we will be there to hear and show the way out of your debt problems.
David Galler is an experienced bankruptcy attorney based in Atlanta, Georgia. For the last 29 years he has filed over 10,000 bankruptcy cases. He has a FIVE STAR client rating on Avvo, Kudzu.com, RateABiz.com, and Google+, among other sites. Over 99% of all Chapter 7 cases he filed have been discharged.