Chapter 12 for Farmers & Ranchers
Chapter 12 is a type of reorganization bankruptcy similar to Chapter 13 but is available only for a family farmer, rancher or fisherman. It was originally created for farmers and ranchers and in 2005 the BAPCPA expanded Chapter 12 to include fishermen. Individuals, corporations, and partnerships are all eligible to file bankruptcy under Chapter 12 if they qualify as a family farmer (which includes farmers and ranchers) engaged in a farming or ranch operation or they qualify as family fishermen engaged in a commercial fishing operation. The terms "farming operation" has a broad definition that includes, in addition to farming, the following: tillage of the soil, dairy farming, ranching, production or raising of crops, poultry, or livestock, and production of poultry or livestock products in an unmanufactured state.
How Chapter 12 Bankruptcy Works
Chapter 12 is one of the rarely used bankruptcy filing options and few attorneys know how to file these types of cases. It is a specialized type of reorganization bankruptcy that absolutely needs a Chapter 12 lawyer who is experienced in handling these types of matters. If your case is filed flawlessly, it can be an effective remedy for helping you reorganize your farm debt or ranch debt even. It is especially useful if you don't qualify for bankruptcy under other chapters due to having too much debt, since Chapter 12 has much higher debt limits than Chapter 13. If your case is not handled properly, your case will be promptly dismissed and you will not obtain any of the benefits that you were seeking.
Who Can File?
Both individuals and businesses can file for Chapter 12. In order to file, you must meet the legal definition of a family farmer, which includes a farmer, a rancher, or a fisherman. Because the definition of farming operation includes "ranching," a rancher can also file bankruptcy under this Chapter, assuming all other requirements are met. If you are a family farmer, rancher or fisherman, you need to be aware of this Chapter because it may provide your best solution.
In addition to falling within the definition of a family farmer, your lawyer will need to prove to the court that the majority of your debts arise out of a farming operation (or ranching or fishing operation) and the majority of your income is received from the farming, ranching, or fishing operation. (There are other statutory requirements to qualify to file and, similar to Chapter 13, there is a statutory limit on how much debt you can have at the time your case is filed. The limits are, however, much higher.
To accommodate the higher amounts of debts that would typically be expected to be borne by a farming, ranching or fishing operation, Chapter 12 has significantly higher debt limits than Chapter 13. Upon the filing of your case, your lawyer will need to establish to the trustee and to the court that you are within the allowable debt limits, otherwise, your case may be dismissed.
When to File
Chapter 12 can be particularly useful for a family farm or ranch operation or commercial fishing operation that wants to file a reorganization case to repay its debts but cannot spend the extraordinary time and money needed to file for bankruptcy under Chapter 11.
An individual family farmer, rancher or fisherman may also find Chapter 12 particularly helpful where the individual does not qualify for filing bankruptcy under Chapter 13 due to the lower debt limits associated with that Chapter but can still qualify under the significantly higher Chapter 12 debt limits.
If you are a family farmer, rancher or fisherman and need help reorganizing your debts, contact Bankruptcy Legal Center today to set up a free bankruptcy consultation with a San Diego bankruptcy attorney to determine if Chapter 12 is right for you.