Chapter 12 is a unique form of bankruptcy, in that it is available specifically as an option for family farms or fishery owners. In Pennsylvania, which has active farming and fishing communities throughout our state, this type of bankruptcy is a particularly relevant choice for saving businesses that may have been in families for generations.
Why a separate option for farming and fishing?
Farmers face unique challenges that don’t necessarily affect other businesses. For example, a farm can have its crops planted, cultivated and ready for harvest, only to have an infestation of locusts wipe them out completely. It is difficult to plan and protect against the whims of nature, and a single season of lost revenue, combined with the high cost of farm equipment and other expenses, can leave farmers drowning in debt.
Similar challenges are faced by the fishing industry. You only have to look to the BP oil spill of 2010 to see the devastating, long-term effects on fishing in the Gulf region and realize how the unexpected can wipe out previously successful businesses through no fault of their own. Boats, crews and equipment for fishing are expensive, and many fishing businesses are already feeling the pinch caused by increased regulations and waning supplies of fish and seafood. One disaster — natural or otherwise — can leave fishers facing insurmountable debt.
The United States government created the Chapter 12 option in 1986 because other types of filings, such as Chapter 11 or Chapter 13 did not work well for farmers or fishers. Chapter 11 business restructuring is a very complex and expensive procedure that was beyond the ability of most commercial farmers or fishery owners to afford. Chapter 13, which involves creation of repayment plans, didn’t provide enough assistance to cover the often large debts connected to agriculture or fishing.
Chapter 12, like other forms of bankruptcy that allow for reorganization, enables farmers and fishers to keep their businesses running while getting a handle on their debt and coming up with a payment plan in partnership with the bankruptcy court-assigned trustee and their creditors. Most of these plans involve making regular payments of set amounts over a period of three to five years.
If you have a farm or fishing business and are feeling overwhelmed by debt, bankruptcy may be a viable recourse. Contact one of our experienced Chapter 12 bankruptcy lawyers in Pennsylvania and get help protecting your business.