How Chapter 12 Bankruptcy Can Help Farmers

Oklahoma farmers play an important role in providing the community with fresh dairy, meat, and grain products, but many of them struggle with debt after a financially debilitating period. If this happens to you, bankruptcy can help.

Chapter 12 is a comparatively new form of bankruptcy designed to help family farmers and fishermen reorganize and repay their debts. It is a debt relief option for single or married farmers and farm partnerships, corporations, and LLCs.

Benefits of Chapter 12 Bankruptcy

When you file for Chapter 12 bankruptcy, you repay your creditors over three to five years, like you would in a Chapter 13 case. It is more efficient and cost-effective than Chapter 11 and allows you to reorganize your farming enterprise without losing the assets that may have been in your family for generations.

Who Can File?

In general, you are eligible to file for Chapter 12 as an individual farmer if your total debts don’t exceed $4,153,150 and:

  • At least half of the fixed debts are related to operating the farm
  • Over 50% of your gross income comes from farming

Farms owned by a partnership or corporation can file if their debts are no larger than $4,153,150 and:

  • Over 50% of the business is owned by a single family or extended family
  • The farm is operated by the family or extended family
  • Over 80% of the value of the business assets are connected to the farm
  • At least half of the fixed debts are related to the farm’s operation
  • Stock in the corporation is not publicly traded

Once you file a petition under Chapter 12, the automatic stay halts most collection actions against the farm. (Even those who co-signed a debt for you are protected under the law.) The bankruptcy judge will then review your proposed debt repayment plan and decide whether it meets the Bankruptcy Code standards for confirmation. If it does, the plan will be approved.

The Repayment Plan

A Chapter 12 requires fixed payments to be made to the trustee on a regular basis. Like Chapter 13, you don’t have to pay all of your secured debts in full, but you must agree to apply all projected disposable income toward the plan payments over a period of three to five years. This income is money that is not reasonably necessary for the support or maintenance of you and your family or for the operation of the family farm. You will receive a discharge once all payments have been made, although courts will sometimes grant a hardship discharge to farmers who could not maintain the payments due to circumstances beyond their control, such as illness or injury.

Many farmers today go through hard times, but with help from the right Chapter 12 bankruptcy attorney, you can make important changes to the way your farm is run and emerge from bankruptcy with a more positive outlook for the future.

Attorney B. David Sisson is one of the few board-certified bankruptcy attorneys in Oklahoma. The certification process is highly demanding and helps ensure that bankruptcy clients in the state benefit from the highest-quality legal services. Board-certified attorneys are also required to pass rigorous examinations that demonstrate their knowledge and have a good reputation with judges and fellow attorneys.

Attorney Sisson is a dedicated, knowledgeable, and experienced bankruptcy attorney. He will guide you through your current legal challenges and help you – and your farm – obtain financial freedom and a more promising future. To schedule a consultation, please contact us today.

B David Sisson


Peer Rating

Independently conducted by Martindale