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Chapter 12 Bankruptcy in New York State for Family Farmers

Chapter 12 applies to the restructuring, reorganization, adjustment, and/or discharge of debts owed family farmers who generate regular income. Originally enacted in 1986, this form of reorganization of debts is similar to New York bankruptcy under Ch. 13, however subject to higher allowances for included debt, special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 considered a family farmer, the US Code specifically 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 New York bankruptcy is filed, arise out of a farming and or agricultural business operations owned by, or managed by, the debtor who receives more than 50 percent of their gross income for the taxable year preceding the taxable year in which the New York 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 a New York 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 New York 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 New York 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.

Qualification for New York bankruptcy relief is not based on US citizenship. Residency within the state, or property ownership within the state may satisfy jurisdictional requirements for consumers seeking relief under Chapter 7 or Chapter 13 of the US Code.

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