One type of bankruptcy that is not frequently used is the Chapter 12 bankruptcy. This is for the reason that this type of bankruptcy can be filed by individuals or business from the agricultural sector only. Chapter 12 is similar to chapter 13 bankruptcy when both deals with restructuring debts for more payable terms. The only difference is that chapter 12 is filed by farmers and fisherman while chapter 13 is filed by average individual or family in US.
In any type of bankruptcy, there are requirements that need to be met first so it is the same with chapter 12. Before filing for this type of bankruptcy, 50% of the income of the individual should be coming from farming or fishing for the past 3 years. The debt should not be more than $3.5M for farming and $1.6M for fishing. The debt should have been incurred because it has been used for farming and fishing operations. At least 50% of the debt should be from farming operations and 80% should be from fishing.
For those who will file chapter 12 bankruptcy for their farming and fishing business, one of the requirement should be one of the member of the family own half of the stock in the company and have control over the operations. At least 80% of the business is from farming and fishing.
When filing for chapter 12 bankruptcies, the debtor should provide the bankruptcy court a complete list of their creditors and the amount that they owe. The debtor should also declare his source of income, income he is receiving and personal or business properties that he/she owns. It is also important to have the list of expenses incurred by their farming and fishing operations.
A meeting will be set for the debtor and the creditor to formulate a payment plan. Chapter 12 bankruptcy is a relief provided for farmers and fisherman. This bankruptcy type is made since farmers and fishermen’s income is not a fixed rate unlike average individuals. Their income will be dependent on the weather and natural disaster can affect their income. Chapter 12 bankruptcy is designed since farmer and fisherman doesn’t have a control of their income.
