July 12, 2020

Information for Tennessee Farmers: Chapter 12 Bankruptcy Might Be An Option

What is Chapter 12 Bankruptcy?

On this Tennessee Bankruptcy Blog, we regularly go over the most common types of personal bankruptcies, Chapter 7 and Chapter 13. However, there are less-known types of bankruptcy protections as well, such as Chapter 9, Chapter 11, and Chapter 12 bankruptcy. In this post, we will focus on Chapter 12 bankruptcy, which may help some of you Tennessee farmers out there. Commonly known as the Family Farmer Chapter, Chapter 12 is designed specifically to meet the needs of family farmers and fishermen.

To be defined as a family farmer for Chapter 12 bankruptcy, you must meet certain criteria. The farmer’s debts can not be over $1.5 million, which does not include debt owed on a home unless it is directly connected to the farming business. At least half of the farmer’s gross income must have been earned from farming in the year prior to the filing, and at least 80% of the debt must be farm related. Also, the farmer must make an income that is large enough to be able to make payments under a Chapter 12 plan, before the bankruptcy petition is approved.

The Basic Process: To file for Chapter 12 bankruptcy, the debtor must first file a bankruptcy petition at a cost of $200. Within 15 days after filing, the debtor must give a complete list of their liabilities and assets, and must pay a deposit of $500 to the appointed Chapter 12 trustee. Within 90 days the debtor needs to file a repayment plan telling how their creditors will be repaid. The debtor must also file a financial report every month which shows disbursements and receipts. Within 20 to 60 days after the bankruptcy petition is filed, the debtor must attend a meeting where they are questioned by the trustee and creditors and suggestions on the repayment plan are made. Within 45 days since the repayment plan was filed, the court will either approve or reject the plan.

Chapter 12 bankruptcy is very similar to Chapter 13, but has a higher debt ceiling than Chapter 13 because farmers and fishermen must sustain higher debts than workers with normal wages. Debtors must repay all or part of their debts within three years, or five years if they can persuade the court of extenuating circumstances.

Just like I would suggest to those thinking of filing a Chapter 13, I advise anyone that is considering filing bankruptcy under Chapter 12 to consult and with an experienced bankruptcy attorney.

Tennessee Chapter 13 Debtors Lead Nation in Repayments to Creditors

Debt burdenThe Chattanooga Free Press reports that Chapter 13 debtors in Tennessee pay more back to creditors than much larger states like Texas, California or New York.   As of September 30, 2008, Tennesseans had paid back over $558 million in active Chapter 13 cases.  Texas Chapter 13 filers were second on the list, paying back $528 million, with Georgia third at $412 million.

Unlike most states, Tennessee debtors file a higher percentage of Chapter 13 cases.  Here, 56% of debtors in 2008 filed Chapter 13, whereas in other states the percentage is much lower.  In California, for example, Chapter 13 amounted to only 19% of cases filed – with 81% of California debtors filing Chapter 7.

Chapter 13, of course, is the repayment plan type of bankruptcy, whereas Chapter 7 permits debtors to wipe out debt.

What does this mean to you?  The trustees and judges in Tennessee bankruptcy courts prefer repayment plans as opposed to debt elimination.  These bankruptcy officials also will try to push you to pay back as much as they can get you to pay.

An experienced consumer bankruptcy lawyer working on your behalf will identify and pursue a form of debt relief that is most advantageous to you.   A good bankruptcy lawyer will serve as your advocate and fight for Chapter 7 relief where appropriate, or create a payment plan that is liveable for you.

What Are The Credit Counseling Course Requirements in Bankruptcy

At Clark and Washington, we get a lot of questions about the credit counseling and financial management course requirements set out in the bankruptcy laws.  When are these courses required?  How much do they cost?  Why are there two courses?  How long do the courses take?

Here is a brief overview of the credit and financial management courses that you are required to take as part of your bankruptcy filing:

Pre-Bankruptcy Credit Counseling

Before you file, you must complete a "credit counseling" course.  This counseling requirement applies whether you are filing Chapter 7 or Chapter 13.  The certification certificate that you receive upon completion of this course is part of our standard filing paperwork.  Pre-filing credit counselors must be Trustee approved.  Here is what will be covered:

  • the counselor will evaluate your financial situation
  • the counselor will provide information about consumer debts (i.e., credit cards and consumer loans) and will discuss alternatives to bankruptcy
  • the counselor will discuss budgeting and help you evaluate whether you have enough in your budget to pursue a debt workout rather than bankruptcy
  • if requested, the counselor will refer you to a debt management agency for the creation of a personal debt management plan
  • the counselor will attempt to offer a long term view of your financial activities and habits

Generally the credit counseling courses last anywhere from 60 to 90 minutes and can be done in person, on the web or via telephone.  Most of the credit counseling agencies we have seen offer this counseling for between $35 and $50 per person.  If you cannot afford to pay the counselor’s fee, you may request a fee waiver from the counselor’s office. All fees and payment should be discussed and agreed to prior to the session.

Pre-Discharge Financial management Course

If you successfully complete your bankruptcy, your judge will issue an official court document called an "order of discharge."  This discharge order formally terminates your obligation to pay the debts that were included in your case.  Before you can get this discharge order, however, you must complete a course called the Financial Management Education course.   As is the case with pre-bankruptcy credit counseling, the financial managment counselor must be approved by the Trustee in your filing jurisdiction.   The purpose of the financial management course is to educate you about:

  • developing a budget and living within your means
  • developing better spending habits
  • learning about money management, including saving, budgeting and checkbook control
  • wise use of credit – what to avoid when accessing available credit

Generally financial management courses last about two hours and can be done in person, on the web or via telephone.   As is the case with credit counseling, the fee will be in the $35 to $50 range.

The financial management counseling company will fax or email a certificate to you and/or your lawyer.  This certificate must be filed with the clerk of court.  If you do not file this certificate prior to the time your case is closed, you will not receive a discharge.

Both course completion certifications together prove that the debtor has been educated by professionals to understand proper budgeting, money management and how to use credit without ending up in trouble. Of course these aren’t the only bankruptcy filing requirements, but these are two of the mandatory steps.  If you have any specific questions about pre-bankruptcy credit counseling or about pre-discharge financial management education, please call our office in Chattanooga, Nashville or Knoxville.

New Median Income Numbers for Tennessee Bankruptcy Filers on February 1, 2008

The office of the United States Trustee has released new median income numbers for bankruptcy cases filed in Tennessee as of February 1, 2008 and thereafter.  We expect that these numbers will remain in effect until around October 1, 2008.  Here are the current numbers:

 

Tennessee Median Income Numbers
1 person household 2 person household 3 person household 4 person household

each additional

person add…

$36,380 $46,039 $53,337 $61,856 $6,900

You can review the full median income chart at the U.S. Trustee’s web site.

What Information Do I Need to Start My Bankruptcy Case?

Once you have decided to file for bankruptcy, you will need to gather the following information and bring it to our office:

  • copy of your most recently filed federal income tax return – if you have filed for tax year 2007, bring that; otherwise, bring your 2006 returns
     
  • copy of pay stubs (also called "pay advices") for this month and the previous six months.  We need these pay advices to analyze your income numbers for the bankruptcy median income and means test.  We will need pay stubs for you and your spouse – whether or not your spouse is filing with you.  The Bankruptcy Court needs information about household income.  If you are self employed or a commissioned sales person, we will need information about your gross income
     
  • credit counseling certificate – the law requires that you obtain credit counseling prior to filing and you will need to bring us or fax us a copy of your certificate
     
  • completed bankruptcy intake questionnaire that includes a list of all of your creditors
     
  • evidence about the valuation of your vehicles and real estate – for cars and trucks, we recommend that you take your vehicle to CarMax, where you can get a written purchase offer at no cost.  For real estate, we recommend that you ask a local real estate agent for a "drive by" appraisal

Our friendly staff is always here to help – please do not hesitate to call us:

Nashville – (615) 254-3633

Knoxville – (865) 689-1777

Chattanooga – (423) 634-1910

 

Cost for Obtaining Copies of Old Bankruptcy Paperwork Increases Again

Our office frequently receives calls from former clients, and occasionally from a non-client former bankruptcy debtor asking about copies of petitions, copies of discharge orders or other bankruptcy papers.

If these documents are readily available to our staff, we are happy to email or mail them to you at minimal or no charge.

If the old bankruptcy documents pre-date the electronic filing era or if we do not have ready access to them, we will refer you to the National Archive for Bankruptcy Paperwork.   Here is a link to the National Archive page that relates to Tennessee bankruptcy case filings.

As you will see, the National Archive can produce bankruptcy paperwork for cases less than 25 years old.  The government will charge you $70 for a copy of the entire case, or $25 if you need a selected document such as a Discharge Order.

We advise all of our clients to keep copies of all bankruptcy paperwork – since these documents are produced by our firm and by the court in Adobe pdf format, they are easily stored on your hard drive or on a CD.   We encourage you to make a backup copy as well.  There is a strong likelihood that you will need your discharge order in the months to come if you want to open a checking account, or if you decided to apply for a mortgage or car loan.