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Bankruptcy for Farmers

Chapter 11 Bankruptcy


Helping Farmers Keep Their Farms during Tough Times

Chapter 11, 12 Bankruptcy & Other Alternatives

chapter 11 bankruptcy

A Chapter 11 bankruptcy and Chapter 12 bankruptcy is available for business and is used by farmers who are faced with this action as their only option, and allows troubled farms (or even individuals in business) to reorganize or restructure debt so that the farm can continue to function. The idea is that a farm will probably be better able to pay debts if given some debt relief verses liquidating a troubled farm's assets. A detailed plan or reorganization is submitted by the debtor to all creditors about four months after the case is filed. Creditors are allowed to vote for or against the plan. If a majority of creditors fail to vote for the plan, a Bankruptcy Court in Kansas may still approve the plan in certain circumstances.

Contact our office now for a Free Chapter 11 Bankruptcy Consultation or call us at 785-273-1353 in Topeka or 800-347-1353.


BANKRUPTCY OPTIONS

If some type of repayment cannot be negotiated with a farms creditors, bankruptcy may be the only alternative. The Bankruptcy Code actually offers some choices for farmers. Under the Bankruptcy Reform Act of 1978, there are several types of bankruptcy protection available, which either involve rearranging the debtor's financial affairs to allow him to continue operating his business or the liquidation of the debtor's asset.

  • Chapter 7 Bankruptcy – Under Chapter 7 proceedings, the debtor's property is collected by a trustee and distributed to creditors according to priorities established in the Bankruptcy Code. Chapter 7 bankruptcy is a liquidation, or straight bankruptcy.

  • Chapter 11 Bankruptcy – Under Chapter 11, a farmer can attempt to reorganize his business operation as an alternative to liquidation. He may continue operating his farm and propose a plan under which all or part of the farming operation continues and his business debts are repaid.

  • Chapter 12 Bankruptcy – Chapter 12 bankruptcy is a streamlined reorganization alternative for farmers. This is similar to a Chapter 13 Bankruptcy which allows reorganization of debts for an individual with a regular income. Chapter 12 allows for adjustment of the debts of a family farmer with regular annual income.

CHAPTER 11 Bankruptcy

Under Chapter 11, only the debtor may submit a plan of reorganization within 120 days of the initiation of the bankruptcy case. Under a typical reorganization plan, the debtor attempts to restructure his debts. Such a plan will generally provide for the repayment of loans secured by real estate to be paid over an extended period of time. Intermediate term loans will be proposed to be paid over the remaining useful life of the collateral, which is typically five to ten years. The interest rate on any such loans may be adjusted under a plan, although it will generally be necessary for the debtor to pay interest at a "market rate" following confirmation of the plan. Most plans will propose that unsecured creditors be paid less than the full amount of their claims in full satisfaction of their claims.

Chapter 11 Bankruptcy – A Chapter 11 Bankruptcy typically classifies claims against the debtor, specifies the treatment to be given each class of claim, and provides the means for carrying out the plan. The plan must be confirmed by the bankruptcy court. There are three steps involved in obtaining confirmation of a plan under Chapter 11:

1. The plan is developed by the debtor

2. Acceptance of the plan by creditors is sought by the debtor

3. The confirmation hearing is held and the plan is either confirmed or not confirmed

For a Chapter 11 bankruptcy to be confirmed, it must be accepted by at least one class of impaired claims. These are claims of creditors that will not, under the plan, be paid in full or whose legal rights are adjusted by the plan. In addition, the bankruptcy court must determine that the plan for a Chapter 11 bankruptcy is feasible.

Confirmation – Confirmation of a plan under Chapter 11 acts as a discharge of all debts, filed or not, excluding those specified as not dischargeable elsewhere in the bankruptcy code. Upon confirmation of a plan, the debtor receives back all his property free and clear of all liens and encumbrances unless such liens are preserved by the plan. Both the debtor and the creditors are bound by the terms of the confirmed plan.

Contact the Law Office of Paul D. Post now for a Free Chapter 11 Bankruptcy Consultation or call us at 785-273-1353 in Topeka or 800-347-1353. We understand that you have been working hard to keep your farm. If you are considering a Chapter 11 bankruptcy, we can help you with all your questions and concerns.

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