Chapter 12 Bankruptcy

OlsenDaines has filed chapter 12 bankruptcy for Northwest farmers since the law was first passed in 1986.

OlsenDaines has filed chapter 12 bankruptcy for Northwest farmers since the law was first passed in 1986.

When a chapter 12 is filed an automatic stay is put in place. All lawsuits and collection action stops. Foreclosure proceedings are stopped and the debtor given a breathing space (90days) to formulate a plan that complies with the requirements of chapter 12 laws. The plan which we will draft will protect you and give you up to five years and even longer to resolve your debt problems allowing you to keep your farm, equipment and home.

Chapter 12 bankruptcy law was largely copied from chapter 13. So the advantages of chapter 13 pour over to chapter 12 with some additional advantages as well. We have filed many thousands of Chapter 13's in Oregon and Washington. Often after consulting with farming clients we learn that problems can be more easily solved in chapter 13. However there are often reasons why a chapter 12 is better.

Major advantages to chapter 12 include:

1. Chapter 12 is available to corporations and partnerships in addition to individuals.
2. The debt limit for chapter 12 is more generous than chapter 13- over 1/2 million.
3. Under chapter 12 the debtor may modify or cram down a home mortgage by paying only the value of the home rather than the full amount of debt BEYOND THE LENGTH OF THE BANKRUPTCY. Currently, chapter 12 is the only chapter of bankruptcy that allows the cram down of mortgages AND 4. Farmers can carve up property rejecting less advantageous acreage and retain only what they need paying only the value of what they want to keep. Or reject certain equipment keeping only what they need, lowering interest and modifying payments!
5. Chapter 12 debtors can extend payments on secured property beyond the length of the bankruptcy-in some cases up to 30 years.
6. There is no "means test" in chapter 12. It doesn't matter what you make to qualify.
Additional advantages:

1. Like chapter 13 unsecured debt can be eliminated.
2. Foreclosures can be stopped and the debtor given time to catch up on missed mortgage payments or the missed payments can be added to the loan balance and the loan can be amortized at the new balance.
3. Debtors can rewrite the terms on farm equipment paying only what it is worth and paying over an extended period, keeping only the items they want.
4. Debtors can modify interest rate to market interest.
Who should consider chapter 12?

1. You are facing foreclosure and need time to catch up on missed payments or time to sell your property.
2. You can reorganize your farming operation by keeping certain equipment paying only what it is worth and extending the time to make the payment.
3. Too much debt prevents you from filing a chapter 13.
4. You want to keep part of the farms- perhaps only the home and by doing so you can drastically lower the amount you owe and payments.
5. You have lots of unsecured debt which needs to be eliminated for you to continue operations. You simply need breathing space!
Do I qualify?

Before you determine if you qualify understand that self diagnosis in bankruptcy is very dangerous. You may think you don't qualify when in fact you do. There are many exceptions and rules which we are familiar with that might qualify you. We can also engage in pre bankruptcy planning. Finally there are other chapters of bankruptcy available. We do them all!
1. Your debt does not exceed around 3,600,000. However you will need to discuss this with us as there are exceptions 2. 50% of the debt is related to farming.
3. More than 50% of the gross income of the individual or the husband and wife for the preceding tax year (or, for family farmers only, for each of the 2nd and 3rd prior tax years) must have come from the farming or commercial fishing operation. What this means if you took some extra outside employment last year you may still qualify if over 1/2 of your income for the prior two years was from farming!