Chapter 12 Bankruptcy for Fishermen and Farmers

There's a Chapter 12 Bankruptcy? Not too many people have heard of Chapter 12, but it does exist, and it can be very powerful. If you're a fisherman or farmer in Massachusetts, have debt problems, and found this page, read it very carefully.  It may be the solution to many of your financial problems.

Who Qualifies for Chapter 12 Bankruptcy?

We must start here, because if you don't meet the definition, you can't file Chapter 12. 

Farmers:

You must be under the debts limit, which is currently $3,792,650.  More than half of these debts (excluding your home mortgages) must come from your farming operation.  Also, more than half of your income from the prior year (or each of the two years before that) must come from your farm.

If the farm is owned by a private corporation or partnership, you must and your family must own at least half of it and run the farm.  80 percent of the assets of the entity must be farm assets, and the same debt limit applies as for individuals.

Fisherman:

Again, you must be under the debts limit, which for fishermen is currently $1,757,475 (adjusting periodically).  More than 80 percent of these debts (excluding home mortgages) must come from fishing operations.  Also, more than half of your income from the prior year must come from your fishing.

If the fishing operation is owned by a private corporation or partnership, the rules are similar to family-owned farms.

Chapter 12 Bankruptcy Basics and Benefits

Why and how is Chapter 12 so powerful?  Quite simply, family farmers and fishermen were favored by lawmakers, so got all the breaks.  Here are some of the ways in which Chapter 12 bankruptcy is amazing and powerful for debtors:

1. No means test.

2. No need for equal monthly plan payment.  You can do seasonal or balloon payments.

3. The big one: No anti-modification provision on home mortgages.  If your house is under water, you can cram it down to its value and pay it over time at a market interest rate.  This is a huge benefit and probably a reason for most farmers and fishermen with under water homes to file Chapter 12 bankruptcy.

4. You do not need to file a plan right away, creditors can't vote on it when you do, and you are under no obligation to make payments to the trustee until 30 days after the Chapter 12 plan gets confirmed.

5. Like Chapter 13 and Chapter 11, Chapter 12 is a reorganization, and it can be used to stop foreclosures, pay tax debts, and deal with dischargeable debts.  Ultimately, your plan is based on what you want to accomplish and also on your income, expenses, assets and debts.

Like Chapter 13 and Chapter 11, Chapter 12 is a reorganization, and it can be used to stop foreclosures, pay tax debts, and deal with dischargeable debts.  Ultimately, your plan is based on what you want to accomplish and also on your income, expenses, assets and debts.

Chapter 12 bankruptcy is not cookie-cutter and is very rare in Massachusetts.  However, it is an extremely powerful for debtors, especially due to the fact that you can forcibly modify home mortgages.  I hope that this page helps more people who qualify find out about it.