Texas Bankruptcy - Chapter 12 Family Farmer

Chapter 12 applies to the adjustment of debts of a family farmer with regular income. Originally enacted in 1986, this form of reorganization of debts is similar to Texas bankruptcy under Ch. 13, however subject to higher allowances for included debt, special plan provisions, and the unique definition of "family farmer" provided for in 11 U.S.C. 101(18). To be an individual family farmer, the code requires "the individual or individual and spouse engaged in a farming operation whose aggregate debts do not exceed $1,500,000 and not less than 80 percent of whose aggregate noncontingent, liquidated debts (excluding a debt for the principal residence of such individual or such individual and spouse unless such debt arises out of a farming operation), on the date Texas bankruptcy is filed, arise out of a farming operation owned or operated by such individual or such individual and spouse, and such individual or such individual and spouse receive from such farming operation more than 50 percent of such individual's or such individual and spouse's gross income for the taxable year preceding the taxable year in which the Texas bankruptcy concerning such individual or such individual and spouse was filed."

Because of the seasonal nature of farming, Congress deemed monthly payments required by other chapters unsuitable for farmers. If qualified, a family farmer filing a Texas bankruptcy under Ch. 12 must generate at least 50% of their income from farm operations and be capable of making regular payments. If past income is unstable, plan confirmation may be denied.

Chapter 12 Payments in Texas Bankruptcy

According to 11 U.S.C. 1226, "payments and funds received by the trustee shall be retained by the trustee until confirmation or denial of confirmation of a plan. If a plan is confirmed, the trustee shall distribute any such payment." In practice, the requirement of payments to a trustee while in Texas bankruptcy under Ch. 12 includes payment of trustee fees which are deducted from amounts paid to creditors. Following the completion of the plan remaining debts are discharged similarly to the restrictions placed on Ch. 13 discharges.

For best results, debtors must carefully plan the selection of chapter, date of filing, and options. All options are not available to all debtors because of variation in financial histories, assets owned, and new income restrictions. Because of the complex nature of recent changes in federal law, the assistance of a qualified attorney or law firm is essential. With assistance, effective debt relief is readily available through the bankruptcy courts.

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