Chapter 12 is a specialized reorganization bankruptcy for family farmers and fishermen. It combines the flexibility of Chapter 11 with the simplicity of Chapter 13.
Chapter 12 is governed by 11 U.S.C. Chapter 12. It was created in 1986 during the farm debt crisis because the existing bankruptcy chapters did not work well for agricultural operations. Chapter 7 meant losing the farm. Chapter 13 had debt limits too low for farm debt. Chapter 11 was too expensive and complex for a family operation.
Chapter 12 allows qualifying farmers and fishermen to propose a repayment plan lasting 3 to 5 years while continuing to operate. A standing trustee oversees the case, keeping costs lower than Chapter 11. Originally temporary, Chapter 12 was made permanent in 2005.
Chapter 12 eligibility is defined in Section 101(18) for family farmers and Section 101(19A) for family fishermen.
| Requirement | Family Farmer | Family Fisherman |
|---|---|---|
| Debt limit | $11,097,350 | $2,268,550 |
| Debt from operation | At least 50% | At least 80% |
| Income from operation | Over 50% (prior year) | Over 50% (prior year) |
| Entities eligible | Individuals, family-owned corps/partnerships | Individuals, family-owned corps/partnerships |
The dollar thresholds above are adjusted every three years. Verify the current limits before filing. The farm debt limit was significantly increased by the Family Farmer Relief Act of 2019.
Chapter 12 and Chapter 13 share the same basic structure -- a trustee-supervised repayment plan over 3 to 5 years. The key differences reflect the realities of agricultural and fishing income:
A Chapter 12 discharge counts as a prior discharge for purposes of Section 1328(f). If you received a Chapter 12 discharge, you must wait 4 years before receiving a Chapter 13 discharge, and 2 years before receiving another Chapter 12 discharge. The period is measured from filing date to filing date.
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