Before the farming crisis of 1986, debt restructuring specific to farms and fisheries was not possible. However, small farms and fisheries can run into serious financial troubles that, without assistance, can lead to the company’s ruin. Chapter 12 bankruptcy was created to specifically help agricultural industries, and it can be the best option available in a number of circumstances.
Once one has decided to move forward with a Chapter 12 bankruptcy filing, the order of events is well defined:
Chapter 12 petition
Meeting of creditors
Submission of the reorganization plan
Once the reorganization plan is approved, it is very important that it is adhered to. This plan lays out a firm budget for both the expenses of the farm and the living expenses of the family. The temptation for many is to create a plan that too optimistically anticipates repayment. A reorganization plan must be reasonable, because if it cannot be followed, a farmer or fisher may be forced into a Chapter 7 liquidation bankruptcy. Furthermore, Chapter 12 bankruptcy is only an option if the farm or fishery has the potential to be a viable business once the bankruptcy process is over, BLC Law Center.