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Bankruptcy - Chapter 12

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When it comes to filing for bankruptcy, there are a number of paths that can be taken that will be advantageous to certain people in certain economic situations. Called chapters, each of these bankruptcy laws works a little different in order to be the least complicated for the person filing under them. Chapter 12 works for family farmers and family fishermen. This includes individuals or individual/spouse couples that operate an independently owned farm as well as businesses and corporations that are run by families or have the majority of their stock within a family. Of course, more conditions do apply, but it is these people who will benefit from Chapter 12 more than others.

Other factors that come into play when filing for Chapter 12 bankruptcy, in addition to being a familial operation, is the size of the debt, which varies depending on whether you are an independent farmer or fisherman or a corporation, as well as having a certain percentage of total household earnings or income (around 80 percent) being solely from farming or fishing practices. Compared to other bankruptcy chapters, Chapter 12 is much more streamlined and easy to understand. It works towards people whose income is seasonal and really focuses on pulling farmers and fishermen out of debt in a timely and efficient manner.

Chapter 12 code states that the debtors filing under it must propose a repayment plan to make installment payments to creditors who forward them with the money to pull themselves out of debt. Generally, a three to five year plan is put into motion. The general time period is three years, but that can be extended if the court decides on a longer period “for cause.” If the plan proposes to pay all of the domestic support claims that are tied with the debtor, the repayment period is generally for five years. Chapter 12 code states that the repayment period can never be longer than five years, though.

Once everything is paid back to the creditors, the debtor will receive a discharge and be released from his or her debt. Certain types of debt, however, are not covered under the Chapter 12 code. These include situations such as alimony or child support debt, debts from fraud, or debts received from death personal injury at the hands of the debtor’s vehicle. Besides these situations, debt for family farmers or family fishermen are covered under this code, as long as everything is paid back within the time period that is proposed at the time of filing for bankruptcy.

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