If you own a farm and face financial turmoil, you might feel overwhelmed and unsure of how to proceed. In these cases, one solution that might offer you a lifeline is Chapter 12 bankruptcy.
Chapter 12 bankruptcy, established by Congress in 1986, provides a solution for “family farmers” with regular annual income. It helps you reorganize your debts and enables you to propose a plan to repay creditors over three to five years while continuing to operate your business. This bankruptcy chapter can provide a pathway toward a more stable financial future.
The conditions for eligibility for Chapter 12 bankruptcy are quite specific. You must earn more than half of your annual income from your farming business. Also, over 50% of your debts must be from your agricultural operation, but cannot exceed $11,097,350. This includes both secured and unsecured debts.
Benefits of filing
When you file for Chapter 12 bankruptcy, you can experience several key benefits. First, you can halt foreclosure proceedings on your property, offering a chance to keep your business and home. Second, you have the opportunity to restructure your debts, making them more manageable. Lastly, it provides a structured repayment plan that caters to your unique circumstances, giving you the control to chart your own financial recovery.
The path after filing
Once you have filed for Chapter 12 bankruptcy, you must adhere to the repayment plan set by the bankruptcy court. You will repay your creditors over a set period, typically three to five years. Successfully meeting your obligations under this plan can help you come out from under your debt burden and set your business on a more secure financial footing.
Chapter 12 bankruptcy provides a specialized solution for family farmers who have fallen on hard times and can’t manage their debt. If you find yourself in such a situation, knowing about this option can be vital in paving the way for a brighter, more stable financial future.