Chapter 12

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Chapter 12 Bankruptcy Attorney in Vermont

Chapter 12

If you run a farm or commercial fishery, you know that it’s rewarding but hard work. Even just a few bad seasons can quickly put your family and everything you’ve built at risk due to unmanageable debt. Fortunately, the law offers a solution to family farmers and fishermen in the form of Chapter 12 bankruptcy.

Although the prospect of filing for bankruptcy can seem disheartening, Chapter 12 bankruptcy lawyer has helped families like yours get their finances back on track after getting out from the crushing weight of unmanageable debt.

We recognize that hiring a lawyer can seem intimidating. That’s why we offer a down-to-earth, personalized approach to our client service, so that you gain the understanding and confidence to pursue the outcome and relief that you deserve.

Contact Lynch Legal Services, PLLC, today for a free and confidential case review to speak with our Vermont Chapter 12 bankruptcy attorney about your situation.

What Is Chapter 12 Bankruptcy?

Chapter 12 bankruptcy provides the process for the adjustment or reorganization of debts for a “family farmer” or “family fisherman” with “regular annual income.” In this process, family farmers and fishermen propose  a plan to repay part or all their debts over a period of three to five years.

Chapter 12 bankruptcy differs from the other forms of bankruptcy reorganization under Chapters 11 and .  Chapter 12 is much simpler than Chapter 11 and less costly.  Chapter 12 is not subject to the debt limits of of Chapter 13.  Chapter 13 reorganization better suited for dealing with the consumer debts that many individuals face, rather than the larger, potentially more complex debts that family farmers and fishermen have.

Chapter 12 offers powerful tools for reorganizing your debt that are not available in Chapters 11 or 13.  The most powerful tools found in a Chapter 12 is the ability to modify any secured debt. This includes mortgages and loans on livestock, crops and equipment.

  • You can modify effectively create a new new loan.
  • Interests rates can be lowered.
  • You can cram down the principal balance down to the value of the collateral.
  • The term of the loan can be increased.
  • You can modify the loan so that any arrears are made part of the balance of new modified loan.

This ability to modify ANY secured loan in Chapter 12 is one of the major . There are other helpful features as well:

  • There is no required “means test” in a Chapter 12
  • The debt limits found in Chapter 13 are much higher in Chapter 12
  • If you need to pay some of your debt with the sale of property, you may be able to have the capital gains tax realized from the sale be treated and an unsecured debt, as opposed to a priority debt.

Who Qualifies for Chapter 12?

Chapter 12 bankruptcy is made available to a “family farmer” or “family fisherman” with “regular annual income.” A petitioner under Chapter 12 must have sufficient income to be capable of making the payments under a Chapter 12 debt repayment plan. However, Chapter 12 also provides for debtors who have seasonally based cash flow.

A debtor qualifies as a family farmer or family fisherman when the debtor is an individual, an individual and their spouse, or a corporation or partnership. Individuals and their spouses qualify for Chapter 12 bankruptcy when they:

  • Are engaged in a farming or commercial fishing operation.
  • Have total debts not exceeding $4,153,150 for a farming operation, or $1,924,550 for a fishing operation (as of 2020).
  • For a farmer, at least 50 percent of debts fixed in amount (excluding debt for the debtor’s home), or for a fisherman, at least 80 percent of debts fixed in amount (excluding debt for the debtor’s home) are related to the farming or fishing operation.
  • More than 50 percent of the debtor’s gross income for the past one to three tax years must have come from the farming or fishing operation.

A corporation or partnership may qualify for Chapter 12 bankruptcy when it meets the following criteria:

  • More than half the stock or equity interest is owned by one family.
  • The family must be engaged in conducting the farming or commercial fishing operation.
  • More than 80 percent of the corporation’s or partnership’s assets must be related to the farming or fishing operation.
  • Have total debts not exceeding $4,153,150 for a farming operation, or $1,924,550 for a fishing operation (as of 2020).
  • For a farming operation, at least 50 percent of debts fixed in amount (excluding debt for a partner or shareholder’s home), or for a commercial fishing operation, at least 80 percent of debts fixed in amount (excluding debt for a partner’s or shareholder’s home) are related to the farming or fishing operation.
  • The stock or equity interest of the corporation or partnership may not be publicly traded.

A debtor cannot file a Chapter 12 petition if a prior petition was dismissed in the past 180 days for willful failure to appear or comply with court orders.

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What to Expect in the Chapter 12 Bankruptcy Process

Though streamlined for family farmers and fishermen, the Chapter 12 bankruptcy still has several steps that must be followed:

  • First, you will need to gather all of your personal financial documents and information along with the documents and information relating to your farming or commercial fishing operation.
  • Within 180 days prior to filing your bankruptcy petition, you must attend an approved credit counseling course.
  • You begin the Chapter 12 bankruptcy process by filing your petition with the federal bankruptcy court in Vermont. In addition to your petition, you must file a schedule of assets and liabilities, a schedule of income and expenses, a schedule of unexpired contracts and leases, and a statement of financial affairs. You must also submit a case filing fee and administrative fee, although you can petition the court for an installment plan to pay these fees.
  • Once your petition is filed with the court, a trustee will be appointed to your case. The commencement of your case also initiates the automatic bankruptcy stay, which prohibits your creditors from making any efforts to collect debts from you or against your property.
  • Within three to five weeks of your filing, the trustee will hold a “meeting of creditors,” during which your creditors and trustee may ask you questions about your financial affairs and the details of your proposed repayment plan (if you have already submitted one). The meeting is designed to resolve outstanding issues the trustee or your creditors have with your petition and proposed plan.
  • Within 90 days of filing your bankruptcy petition, you must file a proposed plan of repayment, which designates an amount for regular fixed payments to the trustee and sets forth how the trustee will disburse these funds to your creditors. The plan must last between three and five years and must provide full payment to priority creditors, provide payment to secured credits up to the value of the collateral (or make up all arrears if the loan term is longer than the payment plan), and pay unsecured creditors only as much as they would have received under a Chapter 7 bankruptcy, so long as the debtors pay all of their projected disposable income
  • Within 45 days of the filing of your plan, the bankruptcy court will hold a confirmation hearing to review the plan and determine whether it meets the standards under bankruptcy law.

How Our Vermont Chapter 12 Bankruptcy Attorney Can Help You

If you are a farmer or commercial fisherman having trouble paying your bills or meeting your debt obligations, Chapter 12 bankruptcy can offer you the relief you need to get your financial affairs in order and start toward a financially sustainable future.

Our Chapter 12 bankruptcy attorney can help you by:

  • Walking you through your options for dealing with your debts, such as credit counseling services, loan modifications, debt consolidation, and bankruptcy, and helping you to make the best decision for you and your family
  • Assisting you with collecting your financial information and records
  • Preparing your bankruptcy petition and associated filings to ensure your case is accepted and does not end up dismissed on a technicality
  • Working with you to develop a feasible repayment plan
  • Communicating with the bankruptcy trustee, including responding to requests for additional documents or information
  • Advocating for your rights and interests during the creditors’ meeting, plan confirmation hearing, and other trustee or court hearings

Get a free and confidential consultation to speak with a knowledgeable Vermont Chapter 12 bankruptcy lawyer about your rights and to learn more about how our firm can help you secure the relief that you need.