Coming to think of it, Chapter 7 and Chapter 13 are two popular chapters when individuals desire to file for bankruptcy. In this backdrop, you would find that Chapter 12 Bankruptcy is aimed to provide assistance to family farmers who face bankruptcy. In essence, this chapter too seems to be tailored to individuals, of a specific category albeit.
The Objective of Chapter 12 Bankruptcy
Assistance to family farmers - Well, sounds like a big statement. Dig deep into the chapter details and you would find that this legislation primarily aims to empower family farmers to reorganize their debts. Please note that when family farmers face the prospect of bankruptcy, they end up forgoing their farming lands.
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This could indeed spell disaster for farmers, as their agricultural lands are really their only source of their earnings.
Advantages of Chapter 12 over Chapters 7 and 13
The first plus point of Chapter 12 is that it is one of the easier chapters of bankruptcy unlike Chapter 7 for sure, where there are a lot of legalities involved. With this chapter being so easy, you would find that the interests of farmers are being kept in mind.
The second plus point, which is tied into point 1 is the fact that farmers may not have to spend a lot of money on attorney fees. Well, ask farmers, and they would tell you that this is a big relief because attorney fees do tend to go very high when filing for bankruptcy.
The third plus point apart from Chapter 12 being more streamlined, is that it is tailored to farmers' situation in debts. At most times, you would find that farmers face huge amount of debts. Filing for Chapter 13 bankruptcy in such a scenario is not an advisable thing to do. In such a scenario, Chapter 12 bankruptcy is the best recourse possible.
Conditions for Chapter 12 Bankruptcy
Agreed Chapter 12 is a farmer-friendly bankruptcy filing statute, but there are some conditions farmers have to meet before applying for this chapter. The first thing farmers need to note is that they need to have sufficient annual income to ensure that the creditors are paid back their debts over a period of time. Of course, the farmers would also need to have a sustained flow of income to help them tide over this crisis.
In essence, bar the two conditions, you would find that Chapter 12 bankruptcy, which was introduced in 1986, is indeed the best alternative for family farmers.
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