Chapter 12 bankruptcy code was added in 1986 so as to help the financially distressed family farmers and fishermen. The main purpose of chapter 12 bankruptcy law was to give family farmers and fishermen a chance to plan and repay their debts so the creditors don’t take away their belongings.
Pre-requisites for filing for chapter 12 bankruptcy law
1. A chapter 12 bankruptcy petition can be filed by any farmer or a fisherman with a fixed and standard annual income. The main reason to enforce this regulation is to make sure that the debtor would be able to make regular payments. Some relief is given to those farmers and fishermen who have seasonal income.
2. There are two basic categories of petitioners – an individual and a corporation.
3. The petitioner, be it an individual or a corporation, must be connected with farming operations or fishing operations.
4. The total debt must not increase the value of the amount decided upon by the government.
5. A certain maximum percentage of the debt should be associated with farming and fishing operations.
6. The government has also designated a set percentage of the total income of the corporation as well as the individual for the previous tax year (that is the year before filing for the chapter 12 bankruptcy petition) that must be from farming and fishing related activities as a condition for filing.
7. An additional requirement for corporations is that the corporation cannot publicly deal in stock.
Details and documents required for filing for chapter 12 bankruptcy
The documents that you require to file for chapter 12 bankruptcy are: details of liabilities and assets, information about current income and expenditures, a statement of financial affairs, and a list of existing contracts and leases. You can file for chapter 12 bankruptcy at any court dealing in bankruptcy related cases in that area where you reside or your corporation is situated. Each court has a specific filing requirement with respect to its jurisdiction and you can get the required details from the clerk’s office.
Other details required for filing for chapter 12 bankruptcy are:
- A detailed list of all the people money is owed to, that is the creditors.
- Details of debtor’s income, consisting of the amount and dependability.
- Debtor’s property’s details.
- Comprehensive details of the debtor’s expenditure per month including expenses related to household and farming/fishing etc.
Cost to file for chapter 12 bankruptcy
The court charges a filing fee with an additional amount added as administrative fee. The petitioner is required to pay the full amount of this fee while filing his case. In some cases where the debtor also has the responsibility of paying child support or alimony, then the court can give an allowance of paying the fees in 4 installments.
The process of filing chapter 12 bankruptcy
After filing the chapter 12 bankruptcy petition, the court appoints trustee who is impartial and administers the case. Trustee’s main responsibility is to receive expenses from debtors and to make necessary distributions to all the creditors. The filing of a petition also results in an automatic stay order which prohibits the creditors to take over anything belonging to the debtor in return of their debt. They cannot file any case or even make a call demanding payment. Instead all the creditors, whose details are provided to the court by the debtor, receive money from the trustee.
Within few days of filing chapter 12 bankruptcy, the debtor must also present a repayment plan. Here also, the court can decide if an extension is needed keeping in mind the circumstances of the debtor. This plan generally lasts between three and five years and must have provisions to provide full payments to all creditors.
A meeting of creditors is also held after the filing of the chapter 12 bankruptcy petition. This meeting must be attended by the debtor as the agenda of the meeting is to provide information to the creditors about the debtor financial condition and his proposed repayment plan.
After the repayment plan is filed, the judge, in charge of the case, determines the feasibility of the plan and whether it meets all the pre-requisite conditions under the code of bankruptcy. After the bankruptcy judge gives his/her nod of approval to the plan, the trustee can go ahead and start distributing the funds it has obtained from the petitioner/debtor.
Chapter 12 bankruptcy law is especially made considering the condition of the farmers and fishermen and gives them a chance to pay back their loans and the government has included many provisions to make filing for chapter 12 bankruptcy as convenient for the farmers and fishermen as possible.