Get Out Of Debt

Chapter 12 is one of the less talked-about chapters in the US bankruptcy code, largely because it is more niche and more specific than the more universal Chapters 7, 11, and 13. While these other forms of bankruptcy declaration are used by the vast majority of Americans and American businesses seeking debt protection under the US Government, Chapter 12 is specifically for Americans working in the agricultural fields.

The basic structure of Chapter 12 bankruptcy is very similar to Chapter 13. Like Chapter 13, Chapter 12 allows for an individual to take on a financial reorganization process. The government’s goal in both chapters is to allow a debtor to restructure his or her debts in a court-ordained process. They both offer immediate, complete relief once the courts accept your application. However, while Chapter 13 is meant for the average individual American or family going through the debt restructuring process, Chapter 12 bankruptcy is meant specifically for farmers and fishers.

Provisions

The modern section of the bankruptcy code protecting family farmers and fishers was created under the Bankruptcy Judges, United States Trustees, and Family Farmer Bankruptcy Act of 1986. While originally meant as a temporary stop-gap until more permanent legislation could be passed (designed to lapse by 1993), the act was extended several times until it was made permanent in 2005.

Basically this form of bankruptcy allows farmers and fishers who meet the requirements listed in the Act to take advantage of higher debt ceilings, and a number of additional exemptions not allowed in other circumstances under Chapter 13.

Requirements

For a farmer or fisher and his or her family to qualify to file for Chapter 12 bankruptcy, he or she must meet the following four requirements:

There are many questions raised when a company files for corporate bankruptcy. As an investor, people would like to what happens to the company, who would look into the interests of investors, and above all, if the old securities have any value left, or is the stock is turned into paste paper until the company is reorganized.

Companies that go out of business or try to recover from crippling debt are governed by federal bankruptcy laws. A bankrupt company, the “debtor,” can use either Chapter 11 or chapter 7 of the Bankruptcy Code.

Under Chapter 11, the company is allowed to “reorganize” its business and attempt to develop into a profitable corporation. The company still functions on a day-to-day basis other than the fact that all important business decisions have to be agreed upon by a bankruptcy court.

Where as under Chapter 7, the company will stops all it operations and completely shut all its functions. The court assigns a trustee to “liquidate” (sell) the company’s assets. The money so collect is then used to pay off the debt, which would take account both the debts to creditors and investors.

During a payment, the investors are paid first, due to their risk involvement. Bondholders have an advantage over stockholders since bonds stand for the debt of the company and the company has agreed to pay bondholders interest and to return their principal. Where as stockholders own the company, and therefore take on greater risk. On a good day, it is the stockholder who would make more money, but at the same time, as the company goes bankrupt, the stockholders bear to lose, as owners are last in line to be repaid if the company fails. Also remember that under Chapter 11, stockholders are still able to trade the stock, but under Chapter 7 the stock is worthless.

The other creditors are usually secured creditors that have low risk factors since the credit that they extend is usually backed by collateral. Collateral can be the mortgage or other assets of the company. They also stand to be paid first as the company files for corporate bankruptcy.

In today’s poor economy, where home foreclosures seem to be commonplace, and where debtors have few options to stop a foreclosure, when the bank does not want to negotiate with the debtor, a chapter 13 filing may be the only way out. The bankruptcy code has set a time frame which a debtor can not file and obtain a discharge in a chapter 13 case, if they have already filed another chapter. When a debtor is forced to file a chapter 13, in order to protect their home, many trustees will simply file a motion to dismiss the case without taking into consideration the strict language of the code. The code does not in fact prohibit a debtor from filing a chapter 13, even if they are still in another 13 or 7, but rather, prohibits a discharge. As such, many trustees do not consider that a debtor may be seeking the protection of certain chapter 13 benefits outside of a discharge.

There is some, although limited case law on point, which would protected the homeowner seeking to save their home, by using the automatic stay, at least for a period of five years. In a 2008 case, the trustee contended that, because debtors were ineligible for discharges under 11 U.S.C.S.