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Eligibility for Chapter 12 Bankruptcy?

HomeBankruptcyEligibility for Chapter 12 Bankruptcy?

Bankruptcy code has a new addition in form of Chapter 12, which is for the families that employed with in farming and fishing as their main source of income. This code allows for debt restructuring and repayment plans for farmers and fishermen by keeping in mind their specific needs.

Chapter 12 Bankruptcy was first introduced in 1986 by act of Congress with a provision for extension, after getting numerous extensions it was finally made permanent in 2005.


To avail a Chapter 12 bankruptcy you need to have regular annual income from farming or fishing operations.

farming and fishing

The total debts for a farming operation should not exceed $4,031,575 and for a fishing operation $1,868,200.


Similarly 50% of the debt for farmer should be from farming and for fisherman 80% of the debt should be from fishing operation.

Filing of Bankruptcy

There are bankruptcy courts in every area, once you have decided to file bankruptcy you need to approach the clerk at the court with the following items:

  • Complete list of creditors, with names and address and the type of loan and amount due
  • Source of income and the frequency of the said income received
  • A complete itemized list of monthly expenses  like food, shelter, medicines, gas, feed, transportation, utilities etc.
  • Complete list of the assets, movable and immovable included

In case only one spouse is filing for bankruptcy under Chapter 12, other spouse’s source of income has to be filed to ascertain family’s financial stability.

Once application is filed the court appoints a neutral trustee to oversee the bankruptcy procedure and at the same time puts an automatic stay on all collection activities that means creditors cannot file any new suits for collection, no calls can be made asking for repayment of loans.

You can get more info here Process of filling Bankruptcy

Credit Counseling

A major part of filing bankruptcy under any chapter is credit counseling.

A list of certified credit counseling agencies is available with the bankruptcy court clerk.

Applicant needs to undergo mandatory counseling as a part of credit counseling process. This counseling needs to be completed in 180 days of filing bankruptcy petition. This can be done either as an individual or a group session. It is available as in person, telephonic and online counseling.

Making payments

The court appointed trustee oversees debt restructuring and debt payment under new plan. Here is how it is done;

  • Applicant needs to make a repayment plan and then submit the same to the trustee. If the trustee is satisfied with the plan then, Trustee will call a meeting of all the creditors between 21-35 days of you submitting the plan
  • At the meeting applicant has to answer questions by the Trustee and the creditors regarding finances and repayment
  • After the meeting unsecured creditors have 90 days and government entities have 180 days to file their claim

Court Hearing

The plan has to be submitted either along with the petition or within 90 days of filing the petition.

Here are 8 rules regarding Bankruptcy filing

Once petition has been filed, creditors are issued with notice and they have a right to either accept or reject the plan during court proceeding.


Court tests legality of the plan and checks if the plan is realistic and debtor can make the payments. Creditors usually object to the amount received and the time period.

Once the plan is confirmed debtor and creditors are bound by the terms of the plan. Debtor has to ensure all the payments are made to the trustee and trustee will in turn make payment to the creditors.


A debtor is discharge of payments under Chapter 12 once all payments are made as the plan. Once these payments are made creditors cannot institute new lawsuits to recover the discharged obligations.

A bankruptcy under Chapter 12 is a complex process, thus it is best suited if it is handled by a competent bankruptcy attorney to ensure no mistake is committed in process.


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