Chapter 12

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Killeen & Waco, Texas Chapter 12 Bankruptcy Lawyer

Serving Communities Throughout Waco, Killeen and Central Texas

What Is Chapter 12 Bankruptcy?

Chapter 12 bankruptcy is specifically designed to assist "family farmers" or "family fishermen" who have a consistent yearly income. It offers a solution to financially burdened family farmers and fishermen by allowing them to create and execute a repayment plan for some or all of their debts. 

Chapter 12 bankruptcy is a specific type of bankruptcy law designed to reorganize the family farmer. Unfortunately, fewer and fewer family farms are able to survive in this challenging economy. Additionally, most of the produce and animals raised for consumption in the United States are raised in huge corporate farms. The family farmer is really a fading reality.

Why Choose Erin B. Shank?

Erin Shank, a Chapter 12 Bankruptcy Attorney, has successfully reorganized several family farmers. In 2011, she filed a Chapter 12 Plan that saved a family farm that had been in a rancher's family since 1850. A large  bank and the Chapter 12 Trustee fought attorney Shank and her client in his reorganization attempts for over one year, but the Waco Bankruptcy Court ruled in the rancher's favor on virtually every issue and his Plan of Reorganization was approved by the Bankruptcy Court over the bank's objections.   Erin B. Shank will always remembers this case as one of the hardest fought and successful cases in her legal career. However, most family farms can be reorganized without such a long protracted legal proceeding.

In 2000, Erin successfully filed and confirmed a Chapter 12 Plan for an 80-year-old farmer who grew strawberries and other berries in Central Texas. Erin never bites into a strawberry without remembering that special client and what an honor it was to reorganize his berry farm.


Considering Chapter 12? Speak with a skilled bankruptcy Chapter 12 lawyer at Erin B. Shank. We serve Waco, Killeen, and beyond. Contact us online or dial (254) 690-4110.


How Does Chapter 12 Bankruptcy Work?

Within the Chapter 12 framework, debtors develop a repayment strategy to distribute payments to creditors over a span of three to five years.

Typically, the plan requires payments to be made over a three-year period unless the court approves a longer-term "for cause." However, if the plan doesn't intend to cover 100% of domestic support claims (such as child support and alimony), if applicable, it must extend over a five-year period and encompass the debtor's entire disposable income. No circumstances permit a repayment plan to extend beyond a five-year period.

How To Qualify for Chapter 12 Bankruptcy

According to the Bankruptcy Code, "family farmers" and "family fishermen" can be categorized in two ways:

  1. An individual or individual and spouse
  2. A corporation or partnership

Those who fit within the first category must satisfy all of the requirements below before filing for Chapter 12:

  1. Engaged in Farming or Fishing: The individual or individual and spouse must be actively involved in a farming or commercial fishing operation.
  2. Debt Limit: Currently as of August 2023, the total debts, both secured and unsecured, must not exceed $11,097,350 for family farmers or $2,268,550 for family fishermen. The debt limits may change over time, so it is important to speak with an experienced bankruptcy lawyer before filing.
  3. Farming/Fishing Debt Ratio: At least 50% (for family farmers) or 80% (for family fishermen) of fixed debts (excluding principal residence debt unless tied to farming/fishing) must stem from the farming or commercial fishing operation.
  4. Income Source: Over 50% of the individual's or the individual and spouse's gross income from the preceding tax year (or from the 2nd and 3rd prior tax years for family farmers) must have originated from the farming or commercial fishing operation.

For corporations or partnerships falling under the second category, fulfilling all the following criteria is necessary before filing Chapter 12 bankruptcy:

  • Ownership and Management: More than 50% of the total outstanding stock or equity must be held by one family or a family and its relatives, and they must actively oversee the farming or commercial fishing operation.
  • Asset Composition: At least 80% of the corporate or partnership assets' valuation should be attributed to the farming or fishing endeavor.
  • Debt Threshold: As of August 2023, the overall indebtedness must not surpass $11,097,350 for farming operations or $2,268,550 for commercial fishing operations. To ensure your debts align with the current filing limits, it's advisable to consult our knowledgeable Chapter 12 attorney at Erin B. Shank.
  • Farming/Fishing Debt Ratio: A minimum of 50% (for farming operations) or 80% (for fishing operations) of the fixed debts, excluding any principal residence debt linked to a shareholder or partner, must originate from the farming or fishing activities.
  • Non-Public Stock Issuance: If the corporation releases stock, it must remain privately held and not traded publicly.

Contact an Experienced Chapter 12 Bankruptcy Attorney

If you are a farmer in Central Texas struggling with farming debt, give Erin B. Shank a call or reach out through our online form B she will be happy to put her years of experience as a bankruptcy lawyer to work for you!

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