Personal Bankruptcy Chapter 12
A Chapter 12 personal bankruptcy offers a way for family fishermen or farmers to pay back their debts to creditors if they are having financial difficulties. If the bankruptcy is approved, it keeps collectors and creditors from coming after the debtor during the bankruptcy process and while they pay back their debts to the creditors.
Since fishing and farming operations are usually seasonal, a Chapter 12 personal bankruptcy with a Chapter 12 bankruptcy attorney provides more flexibility in its payment plan than a Chapter 13 bankruptcy does. It’s crucial that you learn more about what a Chapter 12 bankruptcy is, who qualifies for this type of bankruptcy, and how the Chapter 12 personal bankruptcy works if you are considering going this route.
What is Chapter 12 personal bankruptcy with a Chapter 12 bankruptcy attorney?
Chapter 12 personal bankruptcy was created in response to financial hardships faced by fishermen and farmers during the 1980s. The Chapter 12 personal bankruptcy shares many similarities with Chapter 11 personal bankruptcy and Chapter 13 personal bankruptcy, but it is catered to the specific needs of fishermen and farmers.
Who qualifies for a Chapter 12 personal bankruptcy?
Married couples or individuals with a commercial fishing or farming operation and regular annual income are eligible for a Chapter 12 personal bankruptcy with a Chapter 12 bankruptcy attorney, but they must have:
- More than 50 percent of their gross income from the fishing or farming operation for the previous tax year
- At least 80 percent of the debts from the fishing operation for a family fisherman
- At least 50 percent of their debts from the farming operation for a family farmer
- Total debts that don’t exceed $1,924,550 for a family fisherman or $4,153,150 for a family farmer
If you are filing for a Chapter 12 personal bankruptcy, you cannot have willfully failed to comply with court orders or appear in court or have been voluntarily dismissed after your collectors or creditors sought payment through a bankruptcy court over the past 180 days. You also need to have gone through credit counseling through an approved agency within 180 days before filing for a Chapter 12 personal bankruptcy.
How does Chapter 12 personal bankruptcy work?
If you want to file for a Chapter 12 personal bankruptcy, then you need to get all of your financial info together and submit your voluntary petition for bankruptcy, as well as your statement of financial affairs, a complete list of debts and creditors, all of the schedules, and any other documents that the bankruptcy court needs. You need to file all of these documents, along with any necessary fees, with the clerk of the bankruptcy court in the area or region where you either live or conduct your fishing or farming business.
Just like in all other bankruptcy cases, an automatic stay goes into effect when a fisherman or farmer files for a Chapter 12 personal bankruptcy. This automatic stay keeps your creditors from taking collection actions without getting permission from the bankruptcy court.
The automatic stay helps protect you as the debtor, as well as anyone who might be liable on any of your consumer debts, including debts for household, personal, or family purposes. For example, if you have a credit card on which your sibling, spouse, or another family member is also liable, then that family member would be protected by the automatic stay under the Chapter 12 personal bankruptcy, even though they were not the one to file the bankruptcy. This is also known as a co-debtor stay.
Trustee and creditors
Similar to other bankruptcy cases, the bankruptcy court will appoint a trustee to work with you as the debtor, along with your creditors and collectors. At the beginning of the bankruptcy process, the Chapter 12 trustee will hold a meeting with all of your creditors and collectors, and the trustee and creditors are allowed to ask you any questions about your financial affairs and your petition for bankruptcy during this meeting. The information gained during this meeting will be used to create and set up your bankruptcy payment plan.
What is the Chapter 12 personal bankruptcy payment plan?
Much like in a Chapter 13 bankruptcy case, the debtor needs to create and propose a Chapter 12 personal bankruptcy plan that is fair, feasible, and reasonable and allows you to pay off your debts over the course of about three to five years. This plan should include any secured and unsecured debts and needs to involve paying your creditors and collectors back within the requirements of the Chapter 12 bankruptcy legal process. This means that at the very minimum, any secured creditors need to be paid back the value of their collateral, and any unsecured creditors need to receive as much money as they would during a Chapter 7 liquidation bankruptcy.
With a Chapter 7 bankruptcy, the court will typically discharge your unsecured debts, including unsecured personal loans, medical bills, and credit card debt. The bankruptcy court will discharge these debts at the end of the bankruptcy process, typically about four to six months after you begin.
There are some kinds of unsecured debts that aren’t discharged through a Chapter 7 bankruptcy, including alimony, student loans, child support, some tax debts, court fees and penalties, homeowners association fees, unsecured debts that you intentionally left off your filing, and personal injury debts you owe because of an accident while you were intoxicated. Your credit can also keep specific debts from being discharged.
With a Chapter 12 personal bankruptcy, the bankruptcy judge needs to confirm the plan, and after the confirmation hearing, the Chapter 12 debtor needs to make regular payments to the trustee, who then pays back the creditors.
Chapter 12 personal bankruptcy discharge
You don’t receive a discharge with a Chapter 12 personal bankruptcy until you have paid all of your plan payments to the trustee. There is, however, an exception known as the hardship discharge, which allows you to receive a discharge without making all of your plan payments if it was through no fault of your own and the cause was not in your control. For example, if you have a severe illness, you can likely receive a hardship discharge.
We recommend speaking to a Chapter 12 bankruptcy attorney like the Van Horn Law Group to learn more about filing a Chapter 12 bankruptcy.
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