Arizona Bankruptcy - Chapter 12 Family Farmer
Chapter 12 applies to the adjustment of debts of a family farmer with regular income. Originally enacted in
1986, this form of reorganization of debts is similar to Arizona bankruptcy under Ch. 13, however subject to higher allowances for
included debt, special plan provisions, and the unique definition of "family farmer" provided for in 11 U.S.C.
101(18). To be an individual family farmer, the code requires "the individual or individual and spouse engaged in a farming operation whose aggregate debts
do not exceed $1,500,000 and not less than 80 percent of whose aggregate noncontingent, liquidated debts
(excluding a debt for the principal residence of such individual or such individual and spouse unless such debt
arises out of a farming operation), on the date Arizona bankruptcy is filed, arise out of a farming operation owned or
operated by such individual or such individual and spouse, and such individual or such individual and spouse
receive from such farming operation more than 50 percent of such individual's or such individual and spouse's
gross income for the taxable year preceding the taxable year in which the Arizona bankruptcy concerning such individual or
such individual and spouse was filed."
Because of the seasonal nature of farming, Congress deemed monthly payments required by other chapters
unsuitable for farmers. If qualified, a family farmer filing an Arizona bankruptcy under Ch. 12 must generate at least 50% of their income from farm
operations and be capable of making regular payments. If past income is unstable, plan confirmation may be
denied.
Chapter 12 Payments in Arizona Bankruptcy
According to 11 U.S.C. 1226, "payments and funds received by the trustee shall be retained by the trustee
until confirmation or denial of confirmation of a plan. If a plan is confirmed, the trustee shall distribute any
such payment." In practice, the requirement of payments to a trustee while in Arizona bankruptcy under Ch. 12
includes payment of trustee fees which are deducted from amounts paid to creditors. Following the completion of
the plan remaining debts are discharged similarly to the restrictions placed on Ch. 13 discharges.
Relief authorized for debtors under each chapter under the Code operates differently for each individual.
Relief granted by courts depends upon individual financial histories, disclosures, and qualification. Further,
in the changing economic and political climate today, proposed Code amendments generally expand crediot rights
while limiting or eliminating debtor options.
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