If you are a rancher or a farmer and your annual income is primarily derived by agricultural means, a Chapter 12 Bankruptcy may be filed to reorganize and stay in business. A Chapter 12 Bankruptcy is a viable option where there is a reorganizable agricultural business that has the assets and cash flow to propose a plan acceptable to its creditors which will allow the business to reorganize by the restructuring of its debt so it can continue in operation pursuant to the terms of the proposed plan.
The ultimate goal of the filing of a Chapter 12 is to emerge as a reorganized agri-business that will be successful and profitable enough to pay your creditors under revised terms set out in your confirmed Plan. In a successful Chapter 12, farmers and ranchers generally reduce expenses and try to generate income in sufficient amounts to provide payments to creditors that would be greater than they would otherwise receive if the assets of the farm were liquidated in a Chapter 7 proceeding. Similar to a Chapter 11 reorganization, the procedural demands of Chapter 12 make the exercise more expensive. However, the costs are often offset by the saving benefits of reorganization.
A budget is prepared showing all of your necessary living expenses, and your farm and/or ranching operation payments and other principal obligations. The net sums from your monthly income after taxes and current living and operational expenses are basically offered to creditors over a 3- to 5-year period. You may not be required to pay 100% of your debts to satisfy the requirements of Chapter 12. Upon successful completion of a Chapter 12 Plan, in whatever amount the Court approves, you will receive a discharge of all debts paid off pursuant your confirmed Plan. And you will be able to continue farming and ranching.
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