Bankruptcy for Farmers and Fishermen

7 Feb

The bankruptcy laws before 1986 were designed for either wage earners or big businesses.

Before 1986 there were not many options for families, i.e., farmers or fishers.

Chapter 12 bankruptcy was created with these types of families in mind and is more of a mix between chapter 13 for wage earners and chapter 11 for business.

Bankruptcy for Farmers and Fishermen
Chapter 11 bankruptcy that was created for businesses is very complicated. The forms and filings that must occur need to be done by a lawyer. The fees for filing this type of bankruptcy are very expensive and most families are not able to come up with these funds.

Chapter 13 bankruptcy was created for wage earners. The debt cap for this type of filing is usually not sufficient to cover all the debt that is incurred by a family that farms or fishes.

Under chapter 12, the court places a stay on creditor’s actions to collect debt. The debtor is placed on a payment plan that usually lasts 3 to 5 years in which they must pay back the amounts that are determined under the payment plan. The priority of debts will be outlined by the courts and this will determine who is supposed to receive the payments first. Assets are limited in these types of businesses and hence this is the reason that a payment plan is put into effect versus the liquidation of assets as they are usually not that many compared to the debt.

There are many requirements that a family must meet to qualify for this type of filing. More than half of all of the income from at least one spouse must come from farming or fishing. The spouse must have a steady income that is generated from the business. Of all the debt, 80% must have been incurred in the business.

If the debtor is not able to pay back the debt within the outline repayment time frame, there is a possibility to extend this time frame. However, since a discharge is issued on your assets to prevent them from being liquidated in lieu that you will repay the debt, it can be an arduous process to prove and it must be due to no fault of the debtor. In order to be accepted for the hardship discharge, the amount that has been repaid at the end of the plan must be equal to what the debtor would have received if a chapter 7 had been filed and assets had been liquidated.

As in any bankruptcy situation you should consult with someone who is knowledgeable and is an expert in the field you are filing in. A quick search on the internet can help you locate some experts in your local area. Make sure you have all your paper work in order before contacted them so you can answer any questions they may have over the phone.

Bankruptcy should be a last case scenario. It is never a quick and easy way out of debt because it can follow you for the rest of your life. This is a common misconception so don’t be deceived.

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