If keeping your farm going amid continued financial setbacks is becoming increasingly difficult, you are not alone. Many Pennsylvania farmers have struggled at one time or another when profits are not enough to pay the bills and debts keep piling up. You may be receiving warnings from your creditors, threats of repossession for critical farm equipment and even notices that foreclosure is on the horizon.
Fortunately, your business may be eligible for an option that may put your mind at ease and give you a chance to get back on your feet. Through Chapter 12 bankruptcy, many farmers and others have found relief from their overwhelming debt and the stress of impending debt collection actions. Learning whether you qualify and what you can expect from the process may help you start on your way to a more positive future.
Follow these steps
Chapter 12 bankruptcy is similar in some ways to the traditional Chapter 13 and Chapter 11, which allow businesses and individuals to reorganize their debts to reduce the total amount due and make the payments more manageable. The difference with Chapter 12 is that it is exclusively for individual farmers, family farms, certain corporate farming enterprises as well as those in similar businesses. The seasonal income of these industries requires a unique approach to debt repayment. Chapter 12 follows these general steps:
- You will compile documentation of all your debts and creditors and the financial state of your operation.
- You must obtain and complete the appropriate forms and schedules for Chapter 12.
- You then file your request with the bankruptcy court in your area.
- The court will impose an automatic stay, which prevents your creditors from taking any further collection actions.
- You propose a three- to five-year plan for repaying your debts as you are able.
- The court appoints a trustee who oversees your case, manages your assets and deals with your creditors.
If the court approves your plan, you make regular payments to your trustee, who distributes the money among your creditors. These payments are often more flexible than Chapter 13 because of the nature of your business. After you have made all the payments required by your plan, the court may discharge the remaining debt. However, you must not miss any payments. Through a successful Chapter 12, you may be able to get out from under your debt without the fear of losing your family business.