Anyone involved with the farming industry knows it can be a real challenge to succeed. Most farmers are struggling to survive, including managing payment of huge debt often secured by all of their equipment and their home and property and still generating enough income for payment of expenses to continue operations.  Most farmers are facing a serious financial situation that is often somewhat precarious, and debt and expense management make it often difficult to overcome an unexpected interruption in income. This can have devastating results.  When monthly outflow for debt and expenses exceeds monthly income, financial doom is on the horizon.  Good news is, Chapter 12 can save the farmer and his farm from financial ruin and allow him to continue operations without interruptions of creditors.

Eliminates Barriers
Chapter 12 bankruptcy could eliminate many of the barriers a farmer would face if they tried to reorganize their debts using the Bankruptcy Code under Chapter 11 or 13. Congress designed Chapter 12 bankruptcy to provide an easy way for the financial reorganizations of family farms. It does require that only a family farmer who has a regular annual income from their farming activities be eligible to obtain relief from this form of bankruptcy. It can include corporations, partnerships and limited liability companies as a debtor if more than 50% of the income is derived from farming.  The experienced attorneys at Zellar & Zellar, Attorneys at Law, Inc.,  can explain how Chapter 12 is designed to be less complicated, and more streamlined, than other forms of bankruptcy.  It also is a much broader form of relief than Chapter 13 reorganization or chapter 7 which would cause the farmer to lose everything.

Stops Collection Actions
Once a farmer has filed a petition under Chapter 12, the collections against the farmer and their property must cease under the automatic stay provided by the code.  The farmer who is the debtor is protected from collection or seizure of their assets while they are reorganizing.  This means that creditors are not able to initiate or continue lawsuits. Creditors are not even permitted to call the farmer or their family and request payment. After a Chapter 12 petition is filed with the court, the clerk of the court notifies all creditors listed in the schedules of the bankruptcy filing. Most farmers can save their farms and save their assets and reorganize over 36 to 60 months with certain exceptions.  Tax debts do not have to be paid in full.  Secured claims on residences can be crammed down.

Repayment Plan
Most farmers simply need a new structure to pay their debts, and a Chapter 12 bankruptcy plan will provide the vehicle for restructuring the farmers debt.  A chapter 12 trustee is appointed to oversee the case and collect payments.  Payments can be annually or monthly or periodically.  An experienced bankruptcy attorney can help any farmer needing relief provided by Chapter 12 to draft an effective reorganization plan for repayment in the bankruptcy case. This repayment plan will be submitted to the bankruptcy court for approval. This plan will describe the fixed payments the farmer will regularly provide to their bankruptcy trustee. The trustee will take the funds provided by the farmer and pay the creditors according to the repayment plan. This will make it possible for a farmer to comfortably pay their debts based on their farm’s income since the payments are based on their actual income and expenses and all debt service is included in the plan except long term debts.   Mortgages can be crammed down and the repayment can exceed the term of the bankruptcy plan.

Discharge of Debt
Once a farmer has completed their bankruptcy plan in chapter 12, their secured short term and crammed down debt is paid and the unsecured debts are discharged. When this happens, a farmer is released from all the debts that were included in their case with certain exceptions. The unsecured creditors listed in the bankruptcy petition no longer have any legal right to initiate or continue legal action against the farmer and the farmer receives a “fresh start” in the process, while retaining their assets and continuing their farming operations as Debtor in Possession without daily supervision or interruption.

If you are a farmer who is struggling daily to manage the debt service and monthly expenses and continue operations without interruption, but need some relief from your creditors, contact the experienced attorneys at Zellar & Zellar, Attorneys at Law, Inc., for your free consultation concerning the relief available to farmers under Chapter 12.


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