What’s a “family farmer”? Someone who can file Chapter 12

22 Dec What’s a “family farmer”? Someone who can file Chapter 12

Chapter 12 is a little known part of the Bankruptcy Code that can be exceptionally helpful to family farmers and family fishermen.

Under chapter 7, debtors discharge all of their debt but lose all of their non-exempt assets. Under chapter 13, debtors keep all of their non-exempt assets but devote 5 years of disposable income toward paying their debts. They can’t modify their debts on residential real estate. There are limitations to what they can do to modify their debts.

Family farmers and family fishermen have special rights. They can file a chapter 12 case. Not only that, nobody can file an involuntary bankruptcy petition against a family farmer. One of the main benefits of a chapter 12 case is that the debtor can modify the mortgage lien on the farm house or fisherman’s residence. This was a big battle in Congress for everyone else. We’ll talk more about that in a future article.

Here, let’s take a moment to explain just who is a family farmer:

A family farmer is:

  • a person or married couple (or a corporation owned or controlled by a single family) engaged in a farming operation with debts not more than $3,237,000
  • no less than 1/2 of the debts (except for the residence) from the farming operation
  • for either the current year or each of the past two years

The family farmer must be involved in “farm operations” which is a rather broad term. To be eligible for chapter 12, the family farmer must have a regular income. This means that his income must be sufficiently stable to be able to make regular monthly payments during the term of the chapter 12 plan.

While Northern Illinois and Southern Wisconsin have many urban areas, it is surprising to many that there are still plenty of family farms in the area. Not many attorneys in Northern Illinois or Southern Wisconsin know chapter 12. Lakelaw does. We stand ready to help you in Illinois and Wisconsin.

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Jay S. Fleischman is a bankruptcy lawyer with offices in Los Angeles and New York. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.

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