A new report from the American Farm Bureau Federation reveals that farm bankruptcies are on the rise, increasing 8% over the last 12 months. In 2019 alone, Chapter 12 bankruptcy filings tied with or exceeded decade-high levels in 10 states across the Midwest including Illinois.
Chapter 12 Bankruptcy at a Glance
Chapter 12 bankruptcy protection allows family farmers to restructure their finances to avoid liquidation of their assets and foreclosures by proposing a plan to repay creditors over a 3 to 5 year period. A Chapter 12 bankruptcy is more streamlined, less complicated and less expensive than filing a Chapter 11 business bankruptcy, and often more advantageous than a Chapter 13 bankruptcy because of higher debts family farmers face. Individuals or individuals and their spouse, and corporations or partnerships, may seek relief under Chapter 12 bankruptcy provided they have regular income to make make payments under the plan.
Who Qualifies for Relief Under Chapter 12 Bankruptcy?
Per the U.S. Courts, family farmer individuals and individuals and their spouses must meet each of the following four criteria as of the date of the petition to qualify for relief under Chapter 12:
- The individual or husband and wife must be engaged in a farming operation
- Total debts (secured and unsecured) of the operation must not exceed $4,153,150
- At least 50% of the total debts that are fixed in amount (exclusive of debt for the debtor’s home) must be related to farming
- More than 50% of the gross income of the individual or the husband and wife for the preceding tax year, or for each of the 2nd and 3rd prior tax years, must have come from the farming
A corporation or partnership must meet each of the following criteria as of the date of the filing of the petition:
- More than one-half the outstanding stock or equity in the corporation or partnership must be owned by one family or by one family and its relatives
- The family or the family and its relatives must conduct the farming operation.
- More than 80% of the value of the corporate or partnership assets must be related to the farming operation
- The total indebtedness of the corporation or partnership must not exceed $4,153,150
- At least 50% for a farming operation of the corporation’s or partnerships total debts which are fixed in amount (exclusive of debt for one home occupied by a shareholder) must be related to the farming operation
- If the corporation issues stock, the stock cannot be publicly traded
Contact an Experienced Illinois Farm Bankruptcy Attorney for Help
If you have questions regarding a chapter 12 farm bankruptcy or would like more information regarding chapter 11, 7 or 13 bankruptcy protection contact Peoria, Illinois bankruptcy attorney Charles E. Covey for immediate assistance at 309-674-8125. Illinois bankruptcy attorney Charles E. Covey has helped hundreds of Illinois families get a fresh start and will work with your family to determine if bankruptcy protection is the best strategy to solve your difficult financial situation.
