Chapter 12 Bankruptcy
There are three types of bankruptcy that allow businesses and private individuals to reorganize their debt: Chapter 11, Chapter 12, and Chapter 13. Of the three, Chapter 12 is the most specific—it can only be filed by family farms or family fisherman with regular income. Chapter 12 allows family farms and fisherman who are overwhelmed with debt to create a repayment plan in order to make payments to creditors over a period of three to five years.
Chapter 12 has several advantages to family farms and fisherman over Chapter 11; it is less expensive and less complicated. Chapter 13 is not useful to many farmers and fisherman because that type of bankruptcy was designed for individuals with a smaller amount of debt,
There are different eligibility requirements for Chapter 12 if you are an individual (or individual and spouse) or a corporation. If you are an individual or a married couple who wishes to file Chapter 12, you must: (1) manage a farming or commercial fishing operation, (2) not have debts exceeding 3.2 million (farming) or 1.5 million (fishing), (3) show that the total amount of debts related to the operation is at least 50% for a farming operation or 80% for a fishing operation, (4) establish that more than 50% of the gross income comes from the farming or fishing operation.
The criteria for a corporation that wishes to file for Chapter 12 states that: (1) more than 50% of the stock or equity must be owned by one family or one family and relatives, (2) the family must be in charge of the farming or fishing operation, (3) more than 80% of the assets must be related to the farming or fishing operation, (4) the total amount of debts related to the operation must be at least 50% for a farming operation or 80% for a fishing operation, (5) debts may not exceed 3.2 million (farming) or 1.5 (fishing), (6) the corporation cannot trade stock publicly.