Last time, we began looking at Chapter 12 bankruptcy, a form of bankruptcy which allows family farmers and family fishermen to establish a repayment plan to catch up on their debts and reorganize their business. As we noted, there are certain requirements which must be met in order to qualify for Chapter 12 bankruptcy.
There are two sets of eligibility requirements for Chapter 12 bankruptcy, one for individuals or individuals and a spouse, and another for family farmers organization as a corporation or partnership. It is important for a debtor petitioning for a Chapter 12 bankruptcy to understand these criteria to ensure the business meets the requirements and is able to entering smoothly into the bankruptcy process.
For individual family farmers, with or without a spouse, the requirements are as follows:
- The individual or couple must be engaged in a farming operation or a commercial fishing operation;
- The total debts of the farm operation must be less than $4,031,575;
- At least 50 percent of the total debts claimed must be related to the farming operation;
- Over 50 percent of the individual or couple's gross income for the previous tax year must have come from the farming operation. For family farmers, an alternative is that over 50 percent of the gross income from the second and third prior tax years must have come from the farming operation.
In our next post, we'll continue this discussion of Chapter 12 bankruptcy, looking at the requirements for family farms organization as corporations or partnerships.