What is Chapter 12 bankruptcy?

Chapter 12 bankruptcy is a form of personal bankruptcy that provides a fresh start for a family farmer or fisherman with regular income.

Chapter 12 allows a person to pay off debts over time in a court-controlled manner, as opposed to the quick and often unfair Chapter 7 bankruptcy proceedings.

How does Chapter 12 bankruptcy work?

Chapter 12 begins just like Chapter 11 bankruptcy with the filing of a Petition. It starts with an interview to determine if you are eligible for Chapter 12 bankruptcy. If so, you will be asked to provide all of your financial information, including income and expenses for your family farm or fishing business. You will also be required to submit all tax returns over the past four years--individual, corporate and farm--and proof of any payments made to employees.

After this information is reviewed by the court, a trustee will be assigned to your case who manages your property while you make monthly payments toward your debts. The trustee has no control over day-to-day management of the business unless it's not being run properly. But you must consult with the trustee if you are considering any major changes in your business.

What are Chapter 12 bankruptcy's advantages?

When you file for Chapter 12 bankruptcy, it is possible to stop foreclosure on your home or loss of your farm equipment without filing a separate lawsuit. Your family will be allowed to keep property essential for day-to-day living, such as a family car and personal belongings. Also, you can propose a repayment plan of up to five years.

Chapter 12 is an option for people who have regular income from a family farm or fishing business and want to repay their debts over time under court supervision. Chapter 12 offers some relief from credit card debt and medical bills by allowing you to pay them over time as part of a court-approved repayment plan.

If all your debts are business-related, Chapter 12 may be a good option for you. It allows you to keep property essential for the day-to-day running of your farm or fishing business and propose a repayment plan that lasts up to five years.

Chapter 12 bankruptcy is a form of business reorganization in which a trustee is appointed to supervise a payment plan in order for debtors to repay creditors, as opposed to liquidating assets and paying creditors with the proceeds.

Of those who recently filed for Chapter 12 bankruptcy protection. The majority (75%) work full-time, while 10% work part-time and 15% are self-employed.