Chapter 12 provides relief to qualifying farmers and fishermen, whether individuals or businesses. It allows debtors to, among other things, protect real estate from foreclosure by curing past-due mortgage and property tax payments over time, avoid eviction, assume or reject contracts, modify secured claims (including, in some cases, mortgage liens on a principal residence), and discharge most types of pre-petition debts. These debts may include credit cards, utilities, medical bills, older income taxes, deficiencies, lines of credit, rejected contracts, personal loans, personal guarantees, condo or HOA dues, mortgages, and car loans.

To qualify for Chapter 12, a debtor must have regular annual income and total debts within the limits set by bankruptcy law—which are more generous than those for Chapter 13 or Subchapter V cases. The aggregate debt limit for farming operations is $10,000,000, and for fishing operations, $2,044,225. In business Chapter 12 cases, the entity must not be publicly traded, must be at least 50% family-owned and operated, and more than 80% of its assets must relate to farming or fishing activities.

For individual Chapter 12 debtors, at least 50% of their gross income must come from farming or fishing, and most of their debts must also arise from that activity. Specifically, more than 50% of a farmer’s debts (excluding home mortgages) must arise from farming. For individual fishermen, more than 80% of their debts (excluding home mortgages) must arise from the fishing operation.

During the case, the debtor remains in possession of all estate property and is authorized to use, sell, or lease such property—subject to court approval if outside the ordinary course of business. A trustee is automatically appointed in all Chapter 12 cases. The trustee’s role includes reviewing the debtor’s finances, assisting with plan confirmation, and acting as disbursing agent for certain plan payments. A co-debtor stay is also in effect.

In Chapter 12, the debtor retains exclusive authority to propose a plan and must file it within 90 days of the petition date. Creditors do not vote on the plan. Instead, they receive notice of the confirmation hearing and may object. To be confirmed by the court, the plan must generally:

• Be proposed in good faith
• Be feasible
• Provide for full payment of all priority unsecured claims over a 3–5 year plan period (e.g., recent taxes, domestic support obligations, administrative expenses)
• Satisfy the “Best Interest Test” by ensuring general unsecured creditors receive at least as much as they would in a hypothetical Chapter 7
• Satisfy the “Best Efforts Test” by devoting all of the debtor’s projected disposable income to pay general unsecured creditors over the plan term

Finally, once the debtor completes all required plan payments, the court will enter a discharge.