The Ins and Outs of Chapter 12 Bankruptcy

Chapter 12 bankruptcies are similar to Chapter 11 and Chapter 13 bankruptcies, but Chapter 12 bankruptcy offers greater payment flexibility for the seasonal nature of farms and fisheries. A farm or fishery can fall into one of two categories: (1) an individual or married couple, or (2) a corporation or partnership. One benefit of the Chapter 12 filing is that the farm or fishery is not required to liquidate its property and other assets if the debtor completes its repayment plan.

Debtors must take several steps to file a Chapter 12 bankruptcy. The debtor must file a voluntary petition, along with the various supporting schedules (which serve as an overview of the debtor’s financial situation), including a complete list of assets, debts, and creditors, along with a statement of financial affairs and other documents as required by the court. As with any bankruptcy, a court may dismiss the case or deny a discharge of debts if there is a determination that the debtor committed fraud during the Chapter 12 filing.

After filing a petition, debtors have 90 days to submit a proposed repayment plan. The plan typically must provide, at a minimum, for full repayment of all priority claims (e.g., tax debts, domestic support obligations, etc.) within a 3-to-5-year period. Once the plan is submitted, the bankruptcy judge must confirm the plan before it will take effect (though payments under the pending plan may start before confirmation). Upon confirmation, the plan is binding on the debtor and each creditor. From that point on, the farm or fishery will pay regular payments to the trustee (as provided by the plan), who then pays the creditors. During this time, the debtor may not acquire any new significant debt without prior consultation with the trustee. Failure to make the regular plan payments may result in a dismissal.

As with any bankruptcy, a Chapter 12 bankruptcy is a complicated process. Any fisherman or farmer who is considering a Chapter 12 filing should consult an Indiana bankruptcy attorney first. If you are considering bankruptcy, contact the Indiana bankruptcy attorneys at McNeelyLaw to discuss your options.

This McNeelyLaw LLP publication should not be construed as legal advice or legal opinion of any specific facts or circumstances. The contents are intended for general information purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation.