Individuals and businesses can file for bankruptcy. However, the requirements are different depending on your situation.
What does that mean if you are the individual owner of a small farm? Consider the requirements for filing a Chapter 12 in New York.
What is a Chapter 12 bankruptcy?
Chapter 12 bankruptcies are specific in design. They apply to family farmers or family fishermen who have an annual income from their operations. If you own a farm and struggle financially, a Chapter 12 bankruptcy can help you by creating a plan to repay all or a portion of your debt.
How does filing as an individual differ from filing as a business?
Chapter 12 bankruptcies are available for individuals and corporations. However, the eligibility requirements for both are different. To file as an individual in New York, you must meet these qualifications:
- More than half of your gross income for the previous year came from the farm.
- The total debts, including secured and unsecured, cannot be more than $4,153,150.
- Fifty percent of your total fixed debts must relate to your farming operation.
- You, the individual, must have involvement in the farming operations.
Filing as a corporation means 80% of your assets must correlate with the operation. Stocks cannot be available for public trade. Fifty percent of the corporation’s total fixed debts must relate to the operation, and the total debt cannot exceed the same amount required for individuals, nearly $4.2 million.
Chapter 12 bankruptcies are often a viable way to save farms and help families stay afloat during challenging times.