Chapter 12 Bankruptcy in Missouri: Relief for Family Farmers & Fishermen

• November 3, 2024
• Kelvin Birk
• Bankruptcy

Farmers and fishermen face special challenges such as extreme weather and seasonal fluctuations that can negatively impact their income, so it is not uncommon for them to wind up in debt and unable to meet their bills. With the knowledge of how important these industries are to the economy and taking into account the unique nature of their businesses and income cycles, the United States Bankruptcy Code has created a special type of bankruptcy – Chapter 12 — that makes it easier for them to get out of debt.

Understanding Chapter 12 Bankruptcy

Chapter 12 bankruptcy is for family farmers and fishermen who have “regular annual income” from their operations and wish to repay all or part of their debts and get a fresh financial start. Under Chapter 12, debtors come up with a plan to repay creditors over a 3- to 5-year period under terms that are more favorable for reorganization and more accessible and less complicated and expensive than a Chapter 11 or Chapter 13 bankruptcy proceeding.

Chapter 12 allows for higher debt limits compared to other bankruptcy chapters: up to $11,097,350 for family farmers and $2,268,550 for family fishermen. The plan generally provides for payments over three years unless the court approves a longer period “for cause.” There are certain “cramdown provisions” that provide more favorable treatment of secured claims, allowing debtors to reduce secured debts to the value of the collateral, and there are certain income tax advantages over other bankruptcy options as well.

To file a Chapter 12 bankruptcy, an individual or family-owned corporation must meet specific criteria, including deriving a significant portion of their income from farming or commercial fishing and having a total debt below certain thresholds. This is to make sure that your annual income is sufficient to meet the payments you have agreed to. In addition, you must participate in credit counseling. Filing the petition for Chapter 12 will immediately trigger an automatic stay, which provides relief from creditor pressure. The bankruptcy may be discharged after all payments have been made, leaving farmers and fishermen in a better financial situation.

Benefits of Chapter 12 Bankruptcy

While no one wants to have to file for bankruptcy, if you are a family farmer or fisherman who is overwhelmed with debt, Chapter 12 may be the solution that gives you the relief you need to be able to continue operations. Benefits of Chapter 12 include:

1. It is tailored specifically for family farmers and fishermen by taking into account their unique circumstances and seasonal income patterns.
2. It allows farmers and fishermen to come up with a plan to restructure their debts in a way where they have manageable payments while continuing to operate their business. Creditors do not have to approve the repayment plan.
3. It provides a more streamlined, less complicated, and less expensive process compared to Chapter 11 or 13 bankruptcy, and has higher debt limits compared to other bankruptcy chapters, allowing more farmers and fishermen to qualify.
4. It allows you to keep essential assets like land and equipment necessary to continue the business operations.
5. It provides flexible repayment plans, typically over 3-5 years, while taking into account the seasonal nature of income, including allowing for seasonal or balloon payments. Payments are made more manageable by methods that can include reducing interest rates, extending loan terms, and even lowering the overall amount owed.
6. There are “cramdown” provisions that allow debtors to reduce secured debts to the value of the collateral rather than the amount of the original loan.
7. It has tax advantages, including the ability to treat certain tax claims as unsecured debts that may not have to be paid in full.
8. It provides an automatic stay that halts foreclosures, lawsuits, and other collection actions, but it also encourages more out-of-court negotiations and settlements.

By addressing the specific problems of farmers and fishermen, Chapter 12 provides an effective framework to reorganize debts, restructure operations, and potentially save their businesses while continuing to operate.

The Chapter 12 Bankruptcy Process in Missouri

There are several steps you must take in the Chapter 12 bankruptcy process, and you must meet certain qualifications regarding income and debt and as well as participate in credit counseling. This is to make sure that your annual income is sufficient to meet the payments you have agreed to.

Chapter 12 cases begin by filing a petition with the bankruptcy court serving the area where you live or where your main place of business is. Unless the court orders otherwise, you will have to file the following with the court:

• schedules of assets and liabilities, current income and expenditures, executory contracts and unexpired leases, and
• a statement of financial affairs.

Other key steps include:

• Paying fees: These include a $200 filing fee and a $75-$78 administrative fee to the court.
• Trustee appointment: An impartial trustee is appointed to administer the case.
• Automatic stay: The automatic stay is triggered, stopping most collection actions by creditors.
• Creditors’ meeting: Within 21-35 days after filing, the trustee holds a “meeting of creditors” where you answer questions under oath about your financial affairs.
• Filing the repayment plan: Within 90 days of filing, you must come up with and file a repayment plan that outlines how debts will be repaid over 3-5 years.
• Plan confirmation hearing: Within 45 days of filing, a confirmation hearing is held for the court to decide whether to approve the repayment plan.
• Plan implementation: Once approved, you begin making regular payments to the trustee, who distributes funds to creditors according to the plan.
• Completion: You must complete all payments under the plan, and you will then receive a discharge order from the court that releases you from certain debts.

Get Help Filing for Chapter 12

Throughout the Chapter 12 process, you must adhere to certain requirements, cooperate with the trustee, provide required financial information, and possibly attend additional hearings or meetings. The procedure is complicated, so it can help to work with an experienced Missouri bankruptcy attorney.

Attorney Kelvin Birk is a Certified Public Accountant as well as a bankruptcy attorney, with more than 30 years of experience in accounting and tax and business consulting, and more than 20 years of experience in numerous legal matters.  This combined expertise allows him to provide a deep understanding of your financial problems and the high level of service that meets your needs.

Call us at 573-332-8585 today for a free consultation to start working toward a brighter financial future.

GET HELP NOW 573-332-8585

Attorney Kelvin Birk

Kelvin Birk is a lawyer as well as a certified public accountant, with more than 30 years of experience in accounting and tax and business consulting, and more than 20 years of experience in numerous legal matters. This combined expertise allows our law firm to provide a level of service above that of other firms. Whatever your legal situation, your attorney at Birk Law Firm can counsel you as to the tax implications. We have experience in providing myriad legal representation services to residents of southeast Missouri and other areas.. [ Attorney Bio ]