In the United States Bankruptcy Code, Chapter 12 provides special guidelines designed for bankruptcy filings involving the reorganization of family farms and fishing operations. While Chapter 12 bankruptcy cases are modeled closely after those falling under Chapter 13, there are important differences. One of the main differences is that the amount of debt in question can be significantly higher under Chapter 12, allowing it to be a much more legitimate option for farming and fishing businesses.
Determining eligibility of an individual for filing for Chapter 12 Bankruptcy involves many factors. The person must not have a debt that exceeds $3,544,525. At least half must have arisen out of the operation of their fishing or farming operation. This does not include debts on a homestead, unless they are determined to have directly been involved with running the farm. Also, in the year before the filing, fifty percent or more of the individual’s total income must have come from farming or fishing.
In addition to these requirements, the person must have a “regular annual income” that is “sufficiently stable and regular enough to enable such family farmer to make payments” required by their bankruptcy plan. The rules for eligibility are slightly different for farming and fishing operations that are corporations or partnerships.
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