Chapter 12 bankruptcy in New Jersey applies to “family farmers” and “family fishermen” as defined by the Bankruptcy Code.  Similar to other reorganization chapters in the Code, Chapter 12 bankruptcy in New Jersey allows distressed family farmers and fishermen to submit a plan to repay all or some of their debts.  Usually plans provide for payments over 3 – 5 years.

Chapter 12 Bankruptcy in New Jersey removes some of the hurdles required by Chapter 11 and Chapter 13 bankruptcies.  Chapter 12 bankruptcies are generally less expensive than Chapter 11 which is often used by larger corporation to reorganize and repay existing obligations.  Because family farmers and family fishermen generally have larger debts than wage earners, they will not normally find relief under Chapter 13.


Defining Family Farmers and Family Fishermen Eligibility Under Chapter 12 in New Jersey

Only family farmers and family fishermen can apply under Chapter 12.  Family farmers are individuals and spouses or corporations / partnerships where the entity owns a majority.  The individuals/entities must be engaged in farming/fishing, the debts arose out of the fishing/farming enterprise and income received from the enterprise must be 50% or greater in the years prior to filing.

More specifically, an individual family farmer is eligible under Chapter 12 bankruptcy in NJ if:

  • Total debts do not exceed $4,153,150;
  • At least 50% of the fixed debts, exclusive of home loans, relate to the farm operation; and
  • More than 50% of the gross income is from farming.

A family farm owned by a corporation or partnership can file under Chapter 12 if:

  • More than 50% of the corporation or partnership is owned by one family or an extended family;
  • The family or the extended family operates the farm;
  • More than 80% of the value of the corporate or partnership assets relate to the farm;
  • The total indebtedness of the farm corporation or partnership does not exceed $4,153,150;
  • At least 50% of the corporation’s or partnership’s fixed debts, exclusive of one home loan for a home occupied by an owner, relate to the farming operation; and
  • The stock in the farm corporation is not publicly traded.

A family fisherman is:

  • An individual or individual and spouse engaged in a commercial fishing operation whose debts do not exceed a threshold amount and not less than 80 percent debts arise out of a commercial fishing operation owned or operated by such individual or such individual and spouse; and
  • who receive from such commercial fishing operation more than 50 percent of such individual’s or such individual’s and spouse’s gross income for the taxable year preceding the taxable year in which the case concerning such individual or such individual and spouse was filed; or

If the enterprise is a corporation or partnership, a family fisherman is an fishing enterprise:

  • in which more than 50 percent of the outstanding stock or equity is held by family members and
  • in which more than 80 percent of the value of its assets consists of assets related to the commercial fishing operation; and
  • if such corporation issues stock, such stock is not publicly traded.

How Chapter 12 Bankruptcy in New Jersey Works

The case begins when the debtor files a petition with the NJ Bankruptcy Court.  The debtor also files a list of assets and liabilities, current income and expenses, business related contracts, and a statement of financial affairs.

After filing, a bankruptcy trustee is appointed to evaluate the petition and to collect payments from the debtor and disburse funds to the creditors.

As with most bankruptcy proceedings, all collection actions are “stayed” at the time of filing.  That is, no collection actions can proceed, no collection calls can be made and no wages can be garnished.

After a few weeks, the trustee holds a “meeting of creditors”.  There the debtor testifies under oath as to his/her financial affairs.  The questions are normally posed by the trustee and/or the creditors.  After the meeting, the parties, including the trustee will attend a hearing to confirm the repayment plan.

After completing all payments under the Chapter 12 plan, the debtor receives a discharge which relieves the debtor of obligations provided for by the plan with certain exceptions.  The creditor who were paid in full or partially pay are no longer entitled to any deficiency and cannot begin or continue any legal action to collect on those outstanding amounts.


Chapter 12 Bankruptcy in New Jersey – What to Take Away

Chapter 12 bankruptcy filings in New Jersey are a specialized filing specifically for farmers and fishermen.  Debtors under this Chapter has similar rights as under other reorganization bankruptcy chapters such as Chapter 11 and 13.  The purpose Chapter 12 in NJ is to allow fishermen and farmers to submit a plan to reorganize payments made to existing creditors.  A bankruptcy trustee oversees the case and a discharge of debts results after all of the payments in the plan is complete.

If you have any questions regarding Chapter 12 bankruptcy in New Jersey or any other type of bankruptcy filings, give us a call.  The Coppola Law Group specializes in Chapter 12 bankruptcy in New Jersey and is an experienced NJ bankruptcy law firm.  If your debts have become unmanageable, give us a call today and learn about your options.  We are here to help.  We are at your service.  732-722-7690