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Bankruptcy Law Blog

Monday, May 6, 2019

Special Laws Help Protect Farmers & Fishers

Low commodity prices and the simmering trade war with China have pushed many farmers to the brink. There are persistent whispers that we are on the cusp of something similar to the Farm Crisis of the 1980s. Our firm is hoping for the best, but preparing for the worst by brushing up on the special chapter of the bankruptcy law that applies to farmers and fishers. 

Special Rules Help Preserve A Special Way Of Life 


When we talk about bankruptcy, we are usually talking about Chapter 7 or Chapter 13 bankruptcies. But in a state like Alabama, where many people farm or fish to support their family, it is also important to mention another chapter of the bankruptcy code. Chapter 12 is a special chapter of the bankruptcy code that was enacted specifically so that “family farmers” and “family fishermen” can file for bankruptcy without losing all their assets and giving up their way of life.

Chapter 12 bankruptcies are like Chapter 13 bankruptcies in that the goal is to reorganize operations, and repay debts over time rather than liquidate all assets and start over, but Chapter 12 is a lot better at dealing with the large debts and less predictable income that characterize family farming and fishing operations.

Filing for bankruptcy under Chapter 12 can be a lifesaver for a family that wants to pass on its unique way of life to the next generation, but is currently struggling to make ends meet.

A Few Hoops To Jump Through


There are very specific rules governing who qualifies as “family farmers” and “family fishermen.”
If the filer is an individual or a family, they must meet all of the following criteria:

1.The individual or husband and wife must be engaged in a farming operation or a commercial fishing operation.

2. The total debts (secured and unsecured) of the operation must not exceed $4,031,575 (if a farming operation) or $1,868,200 (if a commercial fishing operation).

3. If a family farmer, at least 50%, and if family fisherman at least 80%, of the total debts that are fixed in amount (exclusive of debt for the debtor’s home) must be related to the farming or commercial fishing operation.

4. More than 50% of the gross income of the individual or the husband and wife for the preceding tax year (or, for family farmers only, for each of the 2nd and 3rd prior tax years) must have come from the farming or commercial fishing operation.


If the farmer or fisher has structured their operation as a corporation or partnership, they must meet all of these criteria:

1. More than one-half the outstanding stock or equity in the corporation or partnership must be owned by one family or by one family and its relatives.

2. The family or the family and its relatives must conduct the farming or commercial fishing operation.

3. More than 80% of the value of the corporate or partnership assets must be related to the farming or fishing operation.

4. The total indebtedness of the corporation or partnership must not exceed $4,031,575 (if a farming operation) or $1,868,200 (if a commercial fishing operation).

5. At least 50% for a farming operation or 80% for a fishing operation of the corporation’s or partnership’s total debts which are fixed in amount (exclusive of debt for one home occupied by a shareholder) must be related to the farming or fishing operation.

6. If the corporation issues stock, the stock cannot be publicly traded.

Don’t Wait Until It’s Too Late


You wouldn’t hesitate to lend a hand to a friend or neighbor who was in need, but it can be difficult to admit that you yourself are struggling. We understand. Our Mobile-based team can discreetly assist you as you evaluate your options and find a way forward. Please contact us today to schedule a free initial consultation. 

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Padgett and Robertson assist clients with Bankruptcy, Personal Bankruptcy, Consumer Bankruptcy, Chapter 7 Bankruptcy, Chapter 13 Bankruptcy and The New Bankruptcy Law in Mobile, Alabama and throughout southern Alabama. Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”



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Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”