A largely forgotten form of Consumer bankruptcy is Chapter 12. Although geared for a family farmer or fisherman, they are designed to be filed by consumers rather than companies.
A Chapter 12 can be filed by a family farmer or fishermen. To qualify, more than 50% of your income must be derived from a farming or fishing enterprise. Fortunately, our courts have given pretty wide latitude to what constitutes a farming enterprise. Even if you are simply using your property to raise horses, you probably qualify.
These cases are similar to chapter 13 bankruptcies. They allow you to “reorganize” your debts. You can change the terms of some secured debts, pay only that portion of unsecured non-priority debts as you can afford to pay, and spread out payments on priority obligations over several years.
There are significant advantages to a chapter 12 bankruptcy compared to a chapter 13 bankruptcy. Here are three of my favorites:
1. The debtor doesn’t have to undergo the means test to do a chapter 12;
2. The limitation on the amount of debt you are allowed is much greater in chapter 13 (although at least 50% of it must be from the farming or fishing operation); and
3. You can actually modify the amount you pay back on the first mortgage of your home. The law prevents you from doing that in a chapter 13 bankruptcy, but if your house is underwater in a chapter 12, you can change the terms. Simply put: you can force the mortgage company to lower the interest, take less towards the principal, and even extend the term of the loan!
Chapter 12’s aren’t for everyone. As noted above, you have to qualify. And they can be complex and therefore expensive. But if you’re operating some form of agriculture or fishing business, you should seek a qualified bankruptcy attorney to determine if this kind of bankruptcy might be a good approach for you.
image credit: cliff1066
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