Chicago Bankruptcy Question: What is a Chapter 12 bankruptcy?

Chicago Bankruptcy Question of the Day: What is a Chapter 12 bankruptcy?  A Chapter 12 bankruptcy is properly titled an "Adjustment of Debts of a Family Farmer or Fisherman with Regular Income" and is commonly referred to as a "farmer's reorganization".  Chapter 12 bankruptcy is very similar to Chapter 13 bankruptcy for wage-earners, but limited to those who qualify as a family farmer or fisherman and with a variety of rules & code sections specifically designed for these professions.

A Chapter 12 bankruptcy is commenced, as most bankruptcies are, by the filing of a bankruptcy petition, along with a plan of reorganization.  The debtor usually remains in possession of the assets of the bankruptcy estate (ie: the farm, equipment, boat, etc.) and is able to maintain ordinary operations throughout the process.  A trustee can be assigned by the court to take over operations if it is determined that doing so would be in the best interest of the creditors in the case.

The plan of reorganization in Chapter 12 cases differentiates creditors by the class into which they fall and provides for repayment of the debts to the best ability of the filer.  Some debts are required to be paid in full while others will only receive partial payments, if any.  Unlike Chapter 13 plans, which usually rely on a regular paycheck(s) to fund the plan, Chapter 12 plans often rely on large blocks of seasonal income when crops are harvested, livestock is taken to auction or fishing seasons are completed.

Again similar to a Chapter 13, a Chapter 12 case is not discharged until the payments under the plan are completed (as opposed to Chapter 9 and 11 cases, where a discharge is entered as soon as a plan is confirmed).  A plan can be modified throughout the term of the case if there is a substantial change in circumstances.

The intent of a Chapter 12 plan is to bring the debtor into a position wherein they are able to operate their farming or fishing operation more efficiently, without the suffocating burden of their debts.  Practicing bankruptcy exclusively in the Chicagoland area, Ledford & Wu does not have a wealth of experience in Chapter 12 cases specifically, but we do have a wealth of consumer bankruptcy experience and our bankruptcy attorneys are more than capable of handling Chapter 12 cases with the same level of skill and expertise that we handle all other cases.  If you may need Chapter 12 bankruptcy protection, call us for a free consultation today.

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