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.



Are There Different Types of Bankruptcy?

If you sit down and discuss your options with an attorney, you may be surprised to hear that there are multiple different types of bankruptcies. An individual will probably be best served by a Chapter 7 bankruptcy or a Chapter 13 bankruptcy.

With a Chapter 7 bankruptcy, an automatic stay is imposed, so all collection efforts will immediately come to a halt. You can maintain possession of your car and your home if you are up to date on your payments and you don’t have a lot of equity. Property that is not exempt must be turned over to a trustee so it can be liquidated. The proceeds will be used to pay the delinquent debts. However, most people who file for this type of bankruptcy have little or no non-exempt property to surrender.

Unsecured debt will be discharged, so you will no longer have to be concerned about collection calls from credit card companies or collection agencies. A Chapter 7 bankruptcy will stay on your credit report for 10 years; that’s the bad news. The good news is that you still may be able to obtain debt after you file if you need to, but you will typically be required to pay higher rates of interest.

Chapter 13 is a reorganization bankruptcy. If you have enough disposable income to make payments on your debts, you will not qualify for Chapter 7, but you can still file for Chapter 13. Under this form of bankruptcy, you will get the same automatic stay. You will be able to maintain possession of your property if you can keep your payments current, and a three to five-year debt repayment plan will be submitted to the court. This plan can include past due mortgage or car payments, so a Chapter 13 can help you avoid a foreclosure or repossession if you have fallen behind. A Chapter 7 does not allow for a repayment plan to correct mortgage arrearage over a period of years.

A Chapter 11 bankruptcy is a reorganization bankruptcy that is used by business entities, but some individuals with very high levels of debt may qualify for this type of bankruptcy. Chapter 12 is a special form of reorganization that is available to some family fishing businesses and family farmers.

We have provided a brief overview in this blog post, but we will be more than glad to answer all of your questions in detail. Our firm offers free consultations to clients in Portland, Medford, Grants Pass, Roseburg, and a number of other cities in Oregon and Washington. If you will like to set up an appointment, fill out the request form on this website and we will contact you ASAP.