§ 8.4     Chapter 12 Not Available or Not Helpful
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 8.4, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

There are good reasons why an individual who is a farmer1 or fisherman2 would prefer Chapter 12 relief to Chapter 13 relief.3 However, an individual who realizes income from farming or fishing may fail the eligibility requirements for Chapter 12 or may need the broader discharge available in a Chapter 13 case.

[2]

To be eligible for Chapter 12, a family farmer must satisfy the strict definitions in 11 U.S.C. §§ 101(18) and 101(19). For example, a tort judgment not related to the farming operation may cause the debtor to fail the requirement that 50 percent of the debtor’s “aggregate noncontingent, liquidated debts . . . arise out of a farming operation. . . .”4 It is not unusual for one or both of a farming couple to also work off the farm. The 50 percent gross income from farming calculation in § 101(18)(A) quickly becomes difficult to satisfy.

[3]

Chapter 12 relief is available to family fishermen as defined in 11 U.S.C. §§ 101(19A) and 101(19B). To be a family fisherman, not less than 80 percent of the debtor’s “aggregate noncontingent, liquidated debts” (excluding home mortgage debt) must “arise out of a commercial fishing operation,” and more than 50 percent of the debtor’s gross income must come from a commercial fishing operation.5

[4]

A farmer or fisherman who cannot qualify as a “family farmer” or “family fisherman” eligible for Chapter 12 may find Chapter 13 the only realistic bankruptcy alternative.

[5]

There are situations in which an individual is eligible for both Chapter 12 and Chapter 13, but Chapter 13 provides greater relief. For example, in a Chapter 12 case, there are exceptions to discharge for all claims that would be nondischargeable under 11 U.S.C. § 523(a).6 In contrast, while the breadth of discharge in a Chapter 13 case after completion of all payments under the plan7 was reduced by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA),8 some subparts of § 523(a) apply in Chapter 12 but not in Chapter 13. For example, the property settlement portion of a marital dissolution is dischargeable in Chapter 13 but not in Chapter 12.9 The exception to discharge for willful and malicious injuries in § 523(a)(6) is broader in a Chapter 12 case than the counterpart in § 1328(a)(4) in a Chapter 13 case.10 An individual family farmer or family fisherman with regular income who has a nondischargeability problem may be better off in Chapter 13.


 

1  See 11 U.S.C. § 101(18), (19), (20), (21).

 

2  See 11 U.S.C. § 101(19A), (19B).

 

3  For example, in addition to most of the powers available in Chapter 13, a Chapter 12 debtor has the power to modify the rights of all real estate–secured claim holders and to provide for payment over a period that exceeds the length of the Chapter 12 plan. See 11 U.S.C. § 1222(b)(9). Compare 11 U.S.C. § 1322(b)(2) and (5).

 

4  11 U.S.C. § 101(18)(A).

 

5  11 U.S.C. § 101(19A)(A).

 

6  11 U.S.C. § 1228(a)(2) excepts from discharge in a Chapter 12 case debts “of the kind specified in § 523(a) of this title.”

 

7  11 U.S.C. § 1328(a)(2). See § 157.1  Broadest Discharge Available, § 157.2  BAPCPA Shrank the Discharge, § 157.3  Completion of Payments after BAPCPA, § 158.1  Alimony, Maintenance or Support, § 158.2  Student Loans, § 158.3  Driving while Intoxicated, § 158.4  Criminal Restitution and Criminal Fines, § 158.5  Claims Not Provided for by the Plan or Disallowed under § 502, § 158.6  Postpetition Claims and § 158.7  Long-Term Debts.

 

8  Pub. L. No. 109-8, 119 Stat. 23 (2005). See § 159.1  Taxes, § 159.2  False Representations and Fraud: § 523(a)(2), § 159.3  Fraud and Defalcation: § 523(a)(4), § 159.4  Unscheduled Creditors: § 523(a)(3), § 159.5  Domestic Support Obligations: § 523(a)(5), § 159.6  Student Loans: § 523(a)(8), § 159.7  Willful or Malicious Injury: § 1328(a)(4), § 159.8  Boating or Flying while Intoxicated: § 523(a)(9) and § 159.9  Chapter 7 Trustee Compensation: § 1326(d).

 

9  See 11 U.S.C. § 523(a)(15), discussed in § 159.5  Domestic Support Obligations: § 523(a)(5).

 

10  See § 159.7  Willful or Malicious Injury: § 1328(a)(4).