Chapter 12 Bankruptcy

In Nebraska, family farmers are experiencing financial distress because of the current market for agricultural commodities. It is common for farmers and farm corporations to experience high levels of debt because of the use of costly equipment or the high costs associated with planting and harvesting crops.

A family farmer who is experiencing financial distress can utilize a Chapter 12 Bankruptcy to obtain debt relief through a repayment plan that lasts 3 to 5 years. The Chapter 12 is specifically designed for family farmers to be more streamlined and less expensive than a Chapter 11 Bankruptcy. At Koenig|Dunne, we will create a tailor-made debt relief plan to address your unique farm operation.

There are two categories of Chapter 12 Bankruptcy cases, those for (1) an individual or individual and spouse or (2) a corporation or partnership.

In order to qualify as an individual or individual and spouse, the financially distressed farmer must:

  1. Be engaged in a farming operation;
  2. Not have total debts (secured and unsecured) exceeding $4,153,150;
  3. Have at least 50% of the total debts (excluding debt for the farmer’s home) be related to the farming operation; and
  4. Have had more than 50% of the gross income for the preceding 3 tax years come from the farming operation.

In order to qualify as a corporation or partnership, the financially distressed farm business must:

  1. Have 50% of the outstanding stock or equity be owned by one family or by one family and its relatives;
  2. Have the family or family and its relatives conduct the farming operation;
  3. Have more than 80% of the value be related to the farming operation;
  4. Not have total debts (secured and unsecured) exceeding $4,153,150;
  5. Have at least 50% of the total debts (excluding debt for the farmer’s home) be related to the farming operation; and
  6. Not be publicly traded, if the corporation issues stock.