Representing Wisconsin Farmers In Chapter 12 Bankruptcy
At Richman & Richman LLC, our Madison bankruptcy attorneys have seen far too many farmers wait too long to seek qualified legal counsel. Many attempt to navigate financial distress alone or rely on their banks for advice. Others mistakenly grant concessions or security interests to trade creditors in an attempt to buy time.
It is vital to remember that when you are in debt, your creditors do not prioritize your long-term success. To survive in today’s farm economy, you need independent, expert guidance. Before liquidating assets or granting further concessions, consult with an experienced Madison bankruptcy lawyer to protect your future.
What You Can Expect In Agricultural Bankruptcy
Chapter 12 bankruptcy provides many alternatives for reorganizing a family farm and family fisherman debts. As a dedicated Madison bankruptcy attorney, we use this section of the Bankruptcy Code that provides for the restructuring of the debts of a small farm, family farm, or family fisherman’s business. This section is a powerful tool that enables farmers and fishermen to reduce or restructure their payments so that they can continue to farm or fish.
Defining Chapter 12 Bankruptcy Under Wisconsin Law
In Wisconsin, a Chapter 12 bankruptcy allows family farmers and family fishermen to avoid foreclosures or liquidations by restructuring their debts. Congress enacted Chapter 12 of the Bankruptcy Code in 1986 in response to the farm financial crisis in the 80’s, and it has been a bankruptcy attorney Madison WI important means of assisting struggling farmers since then.
Chapter 12 allows a family farmer to establish a repayment schedule over a period of time, and has additional benefits beyond what is available in Chapter 11 or 13. Generally, Chapter 12 also allows the debtor to reduce a mortgage to the current value of the property, reduce the interest rate to the current market rate interest and/or extend the payment period on the debt.
General Overview Of The Chapter 12 Process
The process of filing bankruptcy in Madison, WI provides an orderly framework for financial reorganization. Our Madison bankruptcy attorneys walk you through every step:
- Filing the Petition: Careful planning with your attorney is critical prior to filing with the clerk of the bankruptcy court.
- Notice to Creditors: All creditors must receive notice of the bankruptcy, including assets and obligations.
- Trustee Assignment: A bankruptcy trustee and judge will be assigned to the case immediately.
- The Reorganization Plan: Within 90 days, the debtor submits a repayment plan. Only the court can approve this plan after hearing from the creditors.
Three to five years is the usual time for repayment, but secured debts (such as mortgage claims) may be payable over a longer period.
Primary Benefits Of Chapter 12 Bankruptcy
The most beneficial aspects of Chapter 12 are the ability to:
- Reduce the mortgage to the current value of the property
- Reduce the mortgage interest rate to a rate that reflects the current market
- Extend the payment period on the debts
Requirements For Chapter 12 Bankruptcy Eligibility
Farmers experiencing financial distress are encouraged to discuss these issues with a bankruptcy lawyer. Many issues raised here are complicated when applied to specific cases. Good legal advice and careful planning from a bankruptcy attorney Madison are critical to successful reorganization.
To qualify for relief, you must:
- Be engaged in a farming operation.
- Have a regular annual income to support the repayment plan.
- Meet specific debt limits (not totaling more than $10 million for farmers).
Who Can Qualify For A Chapter 12 Bankruptcy In Wisconsin?
To file a voluntary petition for relief, you must:
- Be engaged in a farming operation.
- Have a regular annual income, sufficient to pay according to the terms of your Chapter 12 repayment plan. Seasonal income is sufficient if you make the agreed-upon payments.
- Debts must not total more than $10 million for farmers or $2,044,225 for fishermen.
- Debts (other than home mortgages) must be related to the business operations – at least 50% of total debt for farming operations or 80% of total debt for commercial fishing operations.
- Gross income (over 50%) must be derived from farming or commercial fishing operations.
- Corporations and partnerships qualify only if a single family owns more than 50% of their stock (not publicly traded) or equities, and more than 80% of its assets are related to the farming operation.
Tax Implications Of Chapter 12 Sales
One significant benefit that Chapter 12 has over other bankruptcy chapters, is the ability to discharge tax liability arising from the sale of farm assets. In some cases, asset sales are unavoidable, or may be part of the strategic plan prepared by the Debtor and the Chapter 12 Attorney. In many farm sales, huge capital gains triggered by the sale will result in large tax liabilities. However, those tax liabilities can be treated as dischargeable debt, and in many cases do not need to be paid. This is a fact specific inquiry, so must be analyzed closely by an attorney familiar with Chapter 12 issues.
Contact Us To Determine If Chapter 12 Is An Option For You
The Chapter 12 bankruptcy attorneys at Richmond & Richmond LLC can help with your farm or fishery’s bankruptcy and restructuring needs. We have experience helping struggling family farmers restructure their debts from filing through discharge and continue their family tradition in farming. We are the team you can trust for high-quality and experienced legal services personalized to your needs.
They will review your specific situation in order to analyze the amount of debt, the percentage of the debt that comes from the farming operation, and the percentage of income that comes from the farming operation in order to determine if Chapter 12 bankruptcy is an option for you.
Call 608-630-8990 or contact us online to schedule a consultation.
We are a debt relief agency. We help people file for relief under the Bankruptcy Code.
Frequently Asked Questions for Wisconsin Bankruptcy Attorneys
A farm workout is an out-of-court negotiation between you and your creditors. Our goal in a workout is to restructure your debt, adjust interest rates, or extend payment terms without a formal bankruptcy filing. It is often less expensive and more private, but it requires the voluntary cooperation of your lenders.
Yes. Chapter 12 was specifically designed for family farmers to avoid liquidation. It allows you to create a repayment plan (usually 3 to 5 years) based on your farm’s seasonal income. One of the biggest advantages is the “cramdown,” which can reduce your secured loans to the current fair market value of the collateral (like equipment or land).
To qualify as a family farmer under Chapter 12, you must meet several criteria:
- Engagement: You must be currently engaged in a farming operation.
- Debt Limit: Your total debts must not exceed $11,097,350 (this limit is adjusted periodically).
- Source of Debt: At least 50% of your total debt must be related to the farming operation.
- Source of Income: Over 50% of your gross income must have come from farming in the prior tax year (or in two of the last three years).
Yes. As soon as a bankruptcy petition is filed, an “Automatic Stay” goes into effect. This legally prohibits creditors from continuing collection efforts, foreclosures, or repossessions while your reorganization plan is being developed.
This is a critical area where Chapter 12 excels. Unlike other types of bankruptcy, Chapter 12 allows certain tax liabilities—such as capital gains taxes from the sale of farm assets—to be treated as unsecured debt. In many cases, this means those taxes can be discharged without being paid in full.
Wisconsin offers a voluntary mediation program through the DATCP. While it can be a helpful tool for opening lines of communication with lenders, it is not a substitute for legal counsel. We can help you determine if mediation is the right first step or if a more formal legal strategy is required.
