CHAPTER 12 BANKRUPTCY FOR FAMILY FARMERS- PART II
Farmers may have an alternative to a Chapter 7 bankruptcy liquidation, Chapter 13 adjustment of debts, or a Chapter 11 reorganization of debts. The alternative is Chapter 12, an adjustment of debt for a family farmer.
QUALIFICATIONS OF A CHAPTER 12 FAMILY FARMER (NON-INDIVIDUAL)
Chapter 12 of the Bankruptcy Code includes both family farmers and family fishermen. In this blog and a previous blog, we are focusing only with qualifying as a family farmer. A “family farmer” with regular annual income may file a Chapter 12. The regular annual income requirement is wide-ranging and is usually met by most farmers. The main income requirement is sufficient income to make the Chapter 12 plan payments.
Also, Chapter 12 is not limited to an individual. Many family farms are owned by a non-individual entity. Partnerships, corporations, and the spouse of an individual may be deemed a family farmer under Chapter 12.There are different eligibility requirements for individuals and spouses, than there are for corporations and partnerships.This article deals with corporations and partnerships. Individuals and spouse eligibility were considered in a past blog. The qualifications are set forth in 11 U.S.C. §101(18)(B).
MORE THAN FIFTY PERCENT HELD BY ONE FAMILY THAT CONDUCTS THE FARMING OPERATION
For a farm corporation or partnership to be eligible for a Chapter 12 bankruptcy more than fifty percent of the ownership must be held by one family, or the relatives of such family, and such family conducts the farm operations. This is consistent with the purpose that it truly be a family operation.
EIGHTY PERCENT FARM-RELATED ASSETS
Secondly, for a farm corporation or partnership to be eligible for a Chapter 12 bankruptcy more than eighty percent of the value of the assets owned by the entity must be assets related to the farming operation.
NO MORE THAN $10,000,000 IN MOSTLY FARM DEBT
Thirdly, for a farm corporation or partnership to be eligible for a Chapter 12 bankruptcy the aggregate debts must not exceed Ten Million Dollars. The debt must be mostly farm debt.This test requires that not less than 50 percent of the farmer’s noncontingent, liquidated debts on the date the case is filed (excluding a debt for one dwelling owned by such partnership or corporation in which a shareholder or partner maintains as the principal residence unless such debt arises out of the farming operation) arise out of a farming operation owned or operated by the corporation or partnership. Therefore, timing the filing date may be critical.
NOT A PUBLICLY TRADED STOCK
Lastly, if a corporation, the stock cannot be publicly traded. Not a difficult requirement for most family farms who are not on the NYSE.
This summarizes the corporation and partnership qualifications. Each case must be carefully analyzed by your bankruptcy attorney. The good news, however, is that Congress has carved out special bankruptcy relief to qualifying farmers.
Why not have your financial situation considered by an experienced bankruptcy attorney and former Trustee for the U.S. Bankruptcy Court? Call or contact Martin Long at LONG & LONG P.C.now at 303-832-2655, or www.denverbankruptcylawyer.net.
LONG & LONG P.C.