Chapter 12 farm bankruptcies are designed to enable financially distressed family farmers to propose and carry out a plan to repay all or part of their debts. However, there are several factors to consider when determining if you are eligible to file a Chapter 12 bankruptcy.
There are 2 categories of “family farmers” under the Bankruptcy Code
1. Single or married individuals; and
2. Corporations or partnerships.
Single or married individuals must meet the following 4 criteria:
1. Must be engaged in a farming operation;
2. Total secured and unsecured debts must not exceed $4,031,575;
3. At least 50% of the total debts that are fixed in amount (exclusive of debt for the farmer’s home) must be related to the farming operation; and
4. More than 50% of the gross income of the farmer for the preceding tax year or for each of the 2nd and 3rd prior tax years must have come from the farming operation.
Corporations or partnership must meet the following 5 criteria:
1. More than ½ of the outstanding stock/equity in the organization must be owned by 1 family or by 1 family and its relatives;
2. The family or family and relatives must conduct the farming operation;
3. More than 80% of the value of the assets must be related to the family operation;
4. At least 50% of the organization’s total debt which is fixed in amount (exclusive of debt for one home occupied by a shareholder) must be related to the farming operation; and
5. If the corporation issues stock, the stock cannot be publicly traded.
To discuss the eligibility requirements listed above as well as other considerations when filing a farm bankruptcy, please contact Charles Smith or Nicole Hughes at Telpner, Peterson, Smith, Ruesch, Thomas & Simpson, LLP today at 712-309-3738.