Chapter 12 bankruptcy is specifically for family farmers’ bankruptcies. It is similar to Chapter 11 and Chapter 13 as it is a restructuring plan.
The American Farm Bureau Federation explains there are many benefits to Chapter 12 if your farm is suffering from loss of income due to bad growing seasons.
One of the best parts of the program is the repayment period is seasonal. It will adjust according to when you take in income. This option will help to prevent you from ending up in financial hardship again as you follow the plan. It ensures you will be able to maintain your household and farm without strain paying back according to the plan.
Filing Chapter 12 can enable you to stop foreclosure actions against you and to protect your assets. If you file a Chapter 7 or 13, you would more likely face having to liquidate assets and lose everything you need to continue farming.
Additional benefits to Chapter 12 allow you to retain as much of your money as possible to keep your farm operating. You get the option of a cramdown, which is where you pay the market value of the property instead of the actual debt you have on it.
You also can make irregular payments. You do not have a set equal amount you must pay each month and can even make a balloon payment.
Chapter 12 also has a hardship discharge option if there is a natural disaster or you suffer an illness.
The flexibility of Chapter 12 bankruptcy makes it ideal for farmers and the conditions under which you operate.