The U.S. Bankruptcy Code’s Chapter 12 helps family farmers and fishermen reorganize their finances and relieve their debt. It allows them to retain the equipment they need for work and continue business operations.

Corporate-owned and individually-owned farms and fisheries are eligible for Chapter 12 bankruptcy if they have a regular annual income and their debts are farm or fishery-related. Chapter 12 bankruptcy was introduced because farms and fisheries have income that doesn’t always fit the layout of other types of bankruptcy.

What Is Chapter 12 Bankruptcy?

Under Chapter 12, individuals, couples, partnerships, and corporations can file a petition for debt relief, which entitles them to protection from creditors. If you’re a family farmer or fisherman with a regular income, Chapter 12 can help adjust your debts.

Filers work with a court-appointed bankruptcy trustee to make a repayment plan based on the debtor’s assets, financial obligations, and disposable income. Typically, repayment plans are three to five years long. If you successfully complete the payments, the court will discharge the remaining debts.  

History of Chapter 12 Bankruptcy

In the 1980s, American family farmers dealt with a series of challenges due to harsh weather, stricter qualification rules for agricultural loans, and low commodity prices, which increased farm debt and reduced incomes. The Congress passed Chapter 12 in 1986 as an emergency measure to help family farms.

Although it was introduced as a temporary measure, Congress continued to extend bankruptcy law. In 2005, Congress introduced the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), which made Chapter 12 bankruptcy a permanent part of the Bankruptcy Code. The chapter’s protection was also expanded to include family fishermen and commercial fishing operations.

How Chapter 12 Bankruptcy Works

Knowing how the bankruptcy process works in the case of Chapter 12 will help you be prepared and make the experience as stress-free as possible. Here’s what you can expect when you file for Chapter 12 bankruptcy.

Attend Credit Counseling

If you’re filing for bankruptcy as an individual, it’s mandatory to attend a credit counseling course as a part of the filing requirements. You’ll need to include the course completion certificate with your bankruptcy petition.

File the Petition

Your case will begin when you file your bankruptcy petition. Filing will also trigger the automatic stay, which stops creditors from pursuing debt collections. The court will appoint a bankruptcy trustee, who will review documents, conduct the creditors' meeting, and monitor the bankruptcy proceedings.

Attend the Meeting of Creditors

You’ll need to provide your debtor files and financial documents, like tax returns, profit and loss statements, and bank statements, to the bankruptcy trustee before the 341(a) Meeting of Creditors. The bankruptcy trustee will verify your identity at the meeting and ask questions. Creditors can attend and may also ask questions.

File your Proposed Repayment Plan

You’ll have 90 days after filing the petition to submit a plan of repayment unless the court grants you an extension. Chapter 12 reorganization plans generally last three to five years.

Attend the Confirmation Hearing

The bankruptcy court will set a hearing within 45 days of filing the repayment plan. At this hearing, the bankruptcy judge will consider the arguments of the debtor, lenders, and trustee before approving the proposed plan.

Receive Bankruptcy Discharge

Once your plan is approved, you’ll start making the required payments. You’ll also need to attend a debtor education class if you’re filing as an individual. The bankruptcy court will grant you a debt discharge, which will eliminate your debts as per the bankruptcy plan.

Who Is Eligible for Chapter 12 Bankruptcy?

Only family fishermen and farmers can file for Chapter 12 bankruptcy. Here are some other qualification requirements you’ll need to meet if you’re filing as an individual:

  • You must have a farming or fishing operation.
  • You must have a regular annual income.
  • 50% of your gross income must be from fishing or farming operations.
  • Your total debts (unsecured and secured debts) can’t exceed $11,097,350 if you’re a farmer.
  • Your total debts can’t exceed $2,268,550 if you’re a fisherman.

Corporations and partnerships can also file for Chapter 12 bankruptcy if over 50% of the equity or stock is owned by a single family.

Pros and Cons of Chapter 12

Filing for any type of bankruptcy is a major financial decision that requires careful consideration.

“Chapter 12 can be a lengthy and expensive process but can provide the relief needed for farmers and fisheries to keep them afloat,” explains Teresa Dodson, debt expert and founder of Greenbacks Consulting. 

You may want to speak to a bankruptcy lawyer and consider the following pros and cons before you file for Chapter 12 bankruptcy as this type of business.


  • It offers debt relief and restructuring to farmers and fishermen.
  • The automatic stay for Chapter 12 debtors offers you protection from collection actions and liens.
  • You’ll be able to continue business operations even after bankruptcy.
  • If you successfully complete the repayment plan, the remaining debts may be discharged.


  • Only fishing and farm businesses are eligible for Chapter 12 bankruptcy.
  • Bankruptcy can lower your credit score.
  • It may be difficult for you to obtain credit in the future.
  • You’ll only receive a discharge if you successfully complete the plan payments.
  • You’ll still have to pay alimony, child support, and tax debts.

Although individuals can represent themselves in a Chapter 12 bankruptcy case, the process is quite complicated. A bankruptcy petition and the associated paperwork can be lengthy, and the court may dismiss your case if the information you provide is inaccurate.

Working through the complications that arise in a Chapter 12 bankruptcy case requires knowledge and experience in bankruptcy as well as farming operations. Of the 418,724 bankruptcy cases filed in the U.S. in the year ending June 2023, only 147 cases were Chapter 12. Chapter 12 cases are relatively rare, so you need competent legal advice to guide you through the process.

What To Do Next 

Chapter 12 bankruptcy offers bankruptcy protections and debt relief to family farmers and fishermen. You’ll be able to propose a repayment plan to relieve your debt burden and avoid insolvency and foreclosure while continuing to operate your business.

Consult a bankruptcy attorney specializing in Chapter 12 bankruptcy cases to discuss your specific financial situation to see if this would be a good debt relief measure for you.