I have compiled some frequently asked questions about business and agriculture filings. Read below for the question and its answer.

I operate or have operated a business or farming operation--which chapter should I file?

This decision may be very complicated and depends on many factors. If you wish to liquidate your business, usually a Chapter 7 filing is most appropriate. In limited circumstances, the extra expense of a Chapter 11 may be more suitable. In some cases, filing bankruptcy to liquidate a business may have no benefit. Chapter 11 is primarily used to reorganize rather than liquidate businesses.

If your debts are below the following amounts, you may be eligible to use the Chapter 13 repayment bankruptcy:

  • Secured Debts (debts secured by collateral) less than $1,149,525
  • Unsecured Debts (debts without collateral) less than $383,175

A chapter 11 or 12 may be appropriate if you wish to reorganize a farming or ranching operation. To qualify for chapter 12, you must be a “family farmer.” You must have less than a certain amount of farm related debt and more than a set percentage of your debt and your income must arise out of a farming operation.

How are the creditors paid in Chapter 11 and 12?

I will prepare and file a plan that will set forth the amount and timing of creditor payments. The court will hold a confirmation hearing to determine whether or not the plan is adequate.

Do I have to be able to operate profitably in order to reorganize under Chapter 11 or 12?

We must show the court that your business has been reorganized and capable of making the payments stated in the plan. This determination is made by reviewing your past financial performance, estimating the required amount to fund your plan, and analyzing the prospects for future profitability or cash flow to make those payments. If there isn't a realistic possibility of funding a plan, we are wasting our time and the creditor's money.

Is a trustee appointed in a Chapter 11?

After the filing, you will become a “debtor in possession.” As the debtor in possession, you are a fiduciary for the creditors and essentially serve as a trustee. If there is mismanagement, fraud, dishonest, or other serious problems, the court may order the appointment of a trustee to take over the business.

Is a trustee appointed in Chapter 12?

Yes. However, the trustee's role is limited. You will continue to operate the business unless you are removed as a “debtor in possession” by the court.

Are requirements placed upon me as a “debtor in possession” in a Chapter 12 and 11 case?

Yes. A Chapter 11 or 12 filing may provide you with significant powers and change the balance of power between you and your creditors. These powers, however, do come at a cost. You are a fiduciary for the creditors and are required to adhere to many rules. You must routinely file financial reports with the court and the trustee or the United States Trustee. You will have to appear for at least two hearings. Contested Chapter 11 and 12 hearings may involve complex litigation.

Do I have to operate a business to be eligible for Chapter 11 relief?

No. Chapter 11, however, is very expensive and complicated. A complete analysis of your financial situation must be undertaken to determine whether or not you should file. I do not charge for an initial consultation to explore the prospects for a successful reorganization.

How much does it cost? 

Each case is different. Generally, I require a cash retainer payment. The retainer is applied to any bills that accrue before we file. After filing, the court must enter an order approving my fees before I am paid. After an office consultation, I will be able to provide you with the amount I will need as a retainer. I will be glad to send you a copy of my standard chapter 11 and 12 fee agreements for your review. A filing fee must be paid to the U.S. Bankruptcy Court.

  • Chapter 11 - $1213
  • Chapter 12 - $246 

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