Chapter 12 Bankruptcy: How it Works For Working Families

In states like North Carolina—composed largely of rural areas dotted with farmland and abutting the ripe fishing grounds of the Atlantic—Chapter 12 bankruptcy can be exceptionally helpful to working farming and fishing families who might otherwise be bankruptcy bound.

In part one of the four-part series, entitled Chapter 12 Bankruptcy, we introduced the concept of Chapter 12, provided a brief overview of the special rights related to this protection, and shared who (or in some cases, “what”) qualifies as a family farm or family fisherman under the Bankruptcy Code. In this section, we’ll discuss how a Chapter 12 bankruptcy works, from initial petition filing to debt repayment planning.

If you qualify under the Bankruptcy Code’s broad definitions of a “family fisherman” or “family farmer,” a Chapter 12 case begins by filing a petition with the bankruptcy court where you live or the location of the “principal place of business” for your corporation or partnership. A qualifying husband and wife “family farmer” or “commercial family fisherman” may file. Unless the court orders otherwise, the petition includes a statement of your assets and liabilities; current income and expenditures; current business contracts and leases; and a general statement of your financial affairs.  In order to satisfy all of these petition requirements, you’ll need to gather a list of all creditors and the amounts and nature of their claims; the source, amount, and frequency of your income; a list of all of your property; and a detailed list of your monthly farming/fishing expenses, as well as living expenses, including food, shelter, utilities, transportation, feed, fertilizer, etc. In order to completely evaluate your household's financial position, married individuals must gather this information for each spouse regardless of whether they are filing a joint petition, separate individual petitions, or even if only one spouse is filing.

Upon filing for Chapter 12, you must pay a filing fee and a miscellaneous administrative fee with the clerk of court. With the court's permission, and with specific deadlines, these fees may be paid in installments. Failure to pay these fees may result in dismissal of your case.

Filing the petition under Chapter 12 provides an automatic stay that stops most collection actions against you or your property. Under the automatic stay protection (a protection that exists under all forms of bankruptcy), any creditors—public or private—are not allowed to call you or send you collection letters. During the proceeding, they cannot continue any legal action against you, foreclose on your home, or repossess your car and other assets. And–even if a garnishment order has been issued–the automatic stay stops garnishment of your wages. Additionally, a Chapter 12 filing has the added benefit of protecting co-debtors (those liable with the debtor) from eager creditors seeking collection of consumer debts incurred by a personal, family, or household purpose.

When you file for Chapter 12 bankruptcy, an impartial trustee is appointed to evaluate the case and serve as an agent, for collecting your payments and making distributions to your creditors. Following your filing, the Chapter 12 trustee will hold a "meeting of creditors” at which you will discuss your financial affairs and the proposed terms of your repayment plan. From this meeting, parties typically resolve problems and repayment schedules. Afterwards, you, your trustee, and interested creditors attend a hearing confirming your personal Chapter 12 repayment plan.

Whether your bankruptcy is simple or complex, you'll need an expert attorney to navigate the waters. Contact the experienced attorneys at The Law Offices of John T. Orcutt. Please note that while the Law Offices of John T. Orcutt does not file under Chapter 12, our office can evaluate your personal financial situation and refer your case to an experienced Chapter 12 practitioner if needed. Call us today: +1-833-627-0115.