Only family farmers and fishermen can file for bankruptcy under Chapter 12. If you plan to file as an individual, either by yourself or with a spouse, here are the requirements you’ll need to meet:

• have a farming or commercial fishing operation
• have “regular annual income” (stable and predictable seasonal income is fine)
• 50% of the filer’s gross income must be from farming or commercial fishing operations
• a farmer’s total debts can’t exceed $11,097,350, 50% of which must be due to farming operations, and
• fishermen can’t have more than $2,268,550 in debt, 80% of which must be due to the fishing operation.

Partnerships and corporations can file for bankruptcy under Chapter 12 if a single family owns more than 50% of the stock or equity. (Debt figures exclude home mortgages and are valid for cases filed between April 1, 2022, and March 31, 2025.)

1. Take a Credit Counseling Class

If you file as an individual—as opposed to filing under a business name—you’ll need to attend a credit counseling course before submitting your bankruptcy paperwork to the bankruptcy court. You’ll include the completion certificate with the bankruptcy petition.

2. File the Chapter 12 Case

A Chapter 12 case begins with the case filing. The “automatic stay” order triggered by the bankruptcy case stops most creditors from calling, sending letters, and pursuing debt collection lawsuits. Learn more about the automatic stay and its limitations.

Soon after, the court appoints a bankruptcy trustee to review documents, monitor operations, and conduct a meeting known as the “meeting of creditors,” “creditors meeting,” or “341 meeting.” The trustee also collects plan payments and disperses them to creditors.

3. Give the Trustee Documents and Go to the Meeting of Creditors

Before the meeting, you’ll provide bank statements, profit and loss statements, tax returns, and other financial documents required in a bankruptcy case for the trustee to review. At the meeting, the trustee will verify your identity and ask questions about the bankruptcy filing. Creditors can also ask questions.

4. File Your Proposed Chapter 12 Plan

You’ll have 90 days to file your proposed three-year plan to pay creditors, but you can ask the court to extend the time. The court can also give you up to five years to pay if you can show “cause” or good reason. For instance, most courts will approve a five-plan if you need more time to pay child support or alimony arrearages.

Most filers try to submit the proposed plan before the 341 meeting. If you do, you’ll have an opportunity to discuss potential problems with the trustee at the meeting of creditors and make needed adjustments. Learn more about the plan in “Elements of The Chapter 12 Repayment Plan” below.

5. Attend the Chapter 12 Plan Confirmation Hearing

A proposed plan must be approved or “confirmed” by the bankruptcy court at a hearing set within 45 days of the plan’s filing. If the debtor, trustee, and creditors can’t resolve a problem, the judge will consider each side’s argument at the hearing, although most judges rely heavily on the trustee’s recommendations.

6. Receive Your Chapter 12 Discharge

The court will continue monitoring the case until you make the required payments. If you file as an individual, you’ll also need to complete a debtor education class before the bankruptcy court will close the matter and grant a debt discharge that eliminates debts in accordance with your plan.

7. Other Ways a Chapter 12 Case Can End

The court will dismiss the case without a discharge if the debtor can’t obtain plan confirmation or make the required payments. A debtor also can elect to dismiss a Chapter 12 case or convert it to a Chapter 7 liquidation.

The essential parts of a Chapter 12 repayment plan include the following.

Required plan payments. During the plan period, the debtor must turn over all “disposable income” to the Chapter 12 trustee. “Disposable income” in a Chapter 12 case is the difference between the revenue generated by the debtor’s farm or fishing operations and the amount reasonably needed to cover business expenses and expenses incurred in the maintenance and support of the debtor’s family.

Mortgages and other secured claims. One of the advantages of Chapter 12 is that debtors can “cram down” or reduce secured debt, like farm mortgages and boat loans. Mortgage lenders and other secured creditors must receive the value of the collateral securing the debt. Any balance owed over the collateral’s value becomes an “unsecured debt,” often paid little or nothing in Chapter 12 cases. Secured debt payments can extend beyond the plan’s term, and interest can be reduced to the current market rate.

Trustee fee. Trustees receive a percentage of the funds dispersed to creditors.

Discharge of debt. Chapter 12 plans must meet the “best interests of creditors” test. Under the “best interests” test, creditors must receive at least as much under a Chapter 12 plan as they would in Chapter 7 bankruptcy. As long as the plan meets the “best interests” test, unsecured creditors can be paid pennies on the dollar or nothing at all.