The farming and agriculture industry continues to be an extremely important part of our economy and is necessary for the functionality of our society. Today, those that are in the farming industry can have a lot of opportunity for success but do face many of the same challenges and hurdles that are faced by other business owners. For a farm owner that is struggling to turn a profit and pay debts, filing for bankruptcy could be a good solution. There are several steps in a farm bankruptcy that you should be aware of prior to filing.
What are the steps in a farm bankruptcy
Determine Type of Plan to File
If you are managing a farm and are considering filing for bankruptcy, the first thing that you will need to do is determine the right type of bankruptcy to file. Chapter 7 bankruptcy is an option for farm owners that are insolvent and do not believe that they could afford to repay debtors. With this plan, you will end up losing all of your farm assets, which may need to be liquidated in order to pay off debtors.
Another option to consider is to file Chapter 12 bankruptcy. This is a unique form of bankruptcy protection that is permitted to be used either family farmers or fisherman. This can be an ideal option for those that are in financial challenges, but would like to reorganize and restructure their debts. A bankruptcy attorney will help you determine if Chapter 12 bankruptcy is right for you.
Organization of Financial Records and Submit Bankruptcy Petition
When you are going to file for bankruptcy, another step in the process will be to organize all of your financial records. Some of the items that you will need to include and gather are bank statements, tax returns, loan statements, bill invoices and evidence of any other assets or debts that you may owe. This can include a list of core assets, including houses, barns and equipment that may need to be liquidated.
Through the help of your attorney, you will then need to file your bankruptcy petition. This will declare the type of bankruptcy protection that you are filing for as well as give a list of all of your assets and liabilities. The document will need to be filed with the right bankruptcy court and a notice will be sent to all your creditors.
Receive Automatic Stay
After filing for bankruptcy, you will receive an automatic stay. This process is similar under both a Chapter 7 or Chapter 12 filing. During this process, your creditors will not be able to take any credit actions against you that had not started prior to filing the claim, Any communication or collection attempts will need to be approved through the court system.
Meeting of Creditors
After you have filed your bankruptcy petition, you will shortly receive notification for a meeting that will take place with representatives from all of your creditors. Typically, this part of the process will be handled by an attorney or trustee. During this process, all creditors will be able to identify the debts that they are owed and will ask questions that they have about your financial affairs and capacity to repay the debts. This part of the process will also include developing a repayment plan, if you are going to pursue a Chapter 12 filing.
Development and Implementation of Bankruptcy Plan
An important part of a Chapter 12 bankruptcy filing will be the development of a repayment plan with your creditors. This part of the plan will usually include creating a repayment schedule that is deemed affordable by all parties and will have your debts repaid within five years. Your repayment plan will have to include all secured creditors and could include unsecured creditors as well. If you do not attempt to repay the unsecured creditors, the creditors could fight the plan and try to force you into Chapter 7. The unsecured creditors are legally entitled to any repayment they would reasonably receive through a full liquidation.
Discharge of Bankruptcy Filing
Once you have come to an agreed upon plan, the next step is to follow the repayment plan and stay in good standing with your creditors. Ideally, you should continue to make all of your loan payments on time until the debt is repaid and your bankruptcy filing will be officially discharged. If you fall behind on your plan and cannot make payments, it could force you back into a full Chapter 7 liquidation. However, there are some provisions to this for hardship discharges, which may allow a discharge even if not all of the payments were made. The hardship discharges are uncommon and typically are due to debtor having unforeseen issues, which are no fault of their own, and make full repayment difficult.
Filing for bankruptcy can be a great option for farm owners that are struggling to meet their financial obligations and need help with a restructure. If you are thinking about filing for bankruptcy, you should contact a Chapter 12 bankruptcy lawyer. These attorneys can help by assessing your situation to determine if filing Chapter 12 is right for you. They can then guide you through the whole process to ensure your rights are properly represented.