Who Can Qualify for a Chapter 12 Bankruptcy?

It can be a bit confusing for the layperson to sort through all the different types of bankruptcies that you may hear about. There is Chapter 7, Chapter 11, Chapter 12, and Chapter 13, and you are naturally going to wonder how you should choose from this menu. This is understandable, but when you absorb the facts, you will invariably see your options shrink.

 

First off, a Chapter 11 bankruptcy is typically utilized by businesses, though individuals with very high levels of debt sometimes utilize this type of bankruptcy.

 

A Chapter 7 bankruptcy is a liquidation bankruptcy that is often used by individual debtors. To qualify for this type of bankruptcy, you have to be able to pass a means test. The basic rule of thumb is that you pass the test if your income is less than the median income in your state. However, under some circumstances, it is possible to qualify even if your income exceeds the median.

 

If you do not qualify for Chapter 7, or if you choose to go a different route for other reasons, you could opt for a Chapter 13 bankruptcy. This is a reorganization, so you submit a repayment plan to the court that spans for three years or five years. You may not have enough disposable income to make payments toward all of your responsibilities, so there is a pecking order of sorts that has been established to prioritize debts for repayment purposes.

 

Family Farms and Fishing Businesses

 

Now that we have looked at the other forms of bankruptcy, we can dig into Chapter 12. We practice law in the states of Oregon and Washington, with offices in Portland, Eugene, Vancouver, and quite a few other cities. In our part of the country there are many family farms, and there are family fishing businesses in coastal communities. Chapter 12 bankruptcy is specifically designed for family farmers and fishing businesses that derive more than half of their gross income from these enterprises. For a farmer to qualify, at least half of the total debt must be attributable to the business operations. This figure is 80 percent for commercial fishing businesses.

 

If you would like to discuss a Chapter 12 bankruptcy filing or any other debt relief strategy with a licensed bankruptcy attorney, we would be more than glad to assist you. We offer free case evaluations, and you can give us a call at 1-800-682-9568 to schedule an appointment.