Bankruptcy relief for family farmers
With the understanding that farmers and fishermen face factors such as extreme weather that can negatively impact their income, the United States Bankruptcy Code has created a special type of bankruptcy that makes it easier for them to get out of debt.
Chapter 12 bankruptcy is for family farmers and fishermen who have ‘regular annual income’ from their operations and wish to repay all or part of their debts and get a fresh financial start. Under Chapter 12, debtors come up with a plan to repay creditors over a 3-to 5-year period under terms that are more favorable for reorganization and less complicated and expensive than a Chapter 11 or Chapter 13 bankruptcy proceeding. The plan generally provides for payments over three years unless the court approves a longer period “for cause.”
To file a Chapter 12 bankruptcy, you must meet certain qualifications regarding income and debt and must participate in credit counseling. This is to make sure that your annual income is sufficient to meet the payments you have agreed to. Filing the petition for Chapter 12 will stop or ‘stay’ most collection activities by creditors, and the bankruptcy may be discharged after all payments have been made.
What is the Family Farmer Relief Act of 2019?
The Family Farmer Relief Act of 2019 was introduced to update Chapter 12 of the U.S. Bankruptcy Code to reflect the economic challenges facing distressed farmers. Chapter 12 was added to the Bankruptcy Code in 1986 to provide reorganization relief to family farmers and fishermen to more properly handle this specialized area of bankruptcy law. The Family Farmer Relief Act of 2019 raised the debt limit for Chapter 12 filings to $10 million, and the debt limit was further increased to $11,097,350 on April 1, 2022 due to being indexed for inflation. This limit will be increased again to adjust for inflation on April 1, 2025
The Family Farmer Relief Act reinforces Chapter 12 to provide family farmers with a durable tool to deal with the cyclical economic challenges faced in American agriculture due to situations caused by fluctuating land values, swings in commodity prices, weather calamities and adverse trade policies made by government. 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.
Chapter 12 Bankruptcy provides income tax advantages over the other bankruptcy options available. For those who qualify and meet its requirements, Chapter 12 usually provides more benefits and/or less cost than the alternatives of Chapter 7, Chapter 11 and Chapter 13.
If you have questions about how the Family Farmer Relief Act might impact your bankruptcy, our bankruptcy attorney can help.
Features of Chapter 12
Chapter 12 bankruptcy cases begin by filing a petition with the bankruptcy court serving the area where you live or where your main place of business is. Unless the court orders otherwise, you will have to file the following with the court:
- schedules of assets and liabilities,
- a schedule of current income and expenditures,
- a schedule of executory contracts and unexpired leases, and
- a statement of financial affairs.
Chapter 12 shares similarities with both Chapter 11 (reorganization) and Chapter 13 (individual debt adjustment). However, it has distinct features tailored to meet the needs of family farmers and fishermen, as follows:
- Eligibility Criteria: To qualify for Chapter 12 bankruptcy, an individual or family-owned corporation must meet specific criteria, including deriving a significant portion of their income from farming or commercial fishing and having a total debt below certain thresholds. The debts should be primarily related to the farming or fishing operation.
- Repayment Plan: Chapter 12 involves the development of a repayment plan that proposes a feasible schedule for repayment, typically three to five years. Payments are made more manageable by methods that can include reducing interest rates, extending loan terms, and even lowering the overall amount owed in certain cases. The goal is to allow the debtor the breathing room to stabilize their finances and continue their farming operations.
- Creditor Interaction: Chapter 12 takes a collaborative approach and encourages cooperation and direct negotiation between debtors and creditors.
- Protecting Assets: Chapter 12 allows debtors to retain essential assets such as land and equipment to preserve their farming business.
- Seasonal Income Considerations: Due to the cyclical nature of farming, Chapter 12 offers flexibility in repayment schedules based on the seasonal nature of their income.
How Our Bankruptcy Lawyer Can Help You
When considering bankruptcy, it is important to choose the right bankruptcy law firm. Attorney Kelvin Birk is a Certified Public Accountant as well as a lawyer, with more than 30 years of experience in accounting and tax and business consulting, and more than 20 years of experience in numerous legal matters. This combined expertise allows him to provide a deep understanding of your problems and the high level of service that meets your needs.
We know how important improving your financial situation is to you, so when you hire the Birk Law Firm, we start working for you immediately. We will:
- Navigate Complex Legal Procedures: Chapter 12 bankruptcy involves intricate legal procedures, and we will can guide you through the process, handling all paperwork filings, and legal requirements correctly and on time.
- Negotiate with Creditors: We can handle all negotiations with creditors on your behalf to come up with favorable terms that are realistic for your individual financial situation.
- Develop a Feasible Repayment Plan: We will help come up with a repayment plan you can handle and that will be acceptable to creditors and is likely to be approved by the bankruptcy court.
- Communicate with You. We will be there for you throughout the entire bankruptcy process to keep you informed, answer your questions, and address your concerns.
Get Help with Chapter 12 Bankruptcy
Chapter 12 bankruptcy serves as a crucial lifeline for family farmers facing financial distress. By providing a tailored framework for debt restructuring, it enables farmers and fishermen to navigate economic challenges while preserving their essential assets.
While declaring bankruptcy is a challenging and complex process, Kelvin Birk can help. At the Birk Law Firm, we take the time to get to know you and your family business situation so we can find the best course of action that enables you to emerge stronger in the end.
Call us at 573-332-8585 today for a free consultation to start working toward a brighter financial future.
ALL YOUR LEGAL NEEDS
Why Choose Birk Law?
Birk Law Firm is a small firm by choice that is big on client services. Attorney Kelvin Birk and his team are responsive to their clients’ needs. When we sign on as your law firm, you can count on us for strong legal counsel, from negotiations to settlement to trial.
Our clients benefit from the intertwining of Kelvin Birk’s legal and CPA background and experience. We provide well-rounded advice to solve both legal and financial issues and to come up with creative solutions. We use modern technology to deliver legal services in a more efficient and client-focused manner than was previously possible.
We provide personalized and compassionate service. We believe that each client’s matter is the most important matter in the world to them, and we strive to treat it that way.
