Chapter 12 Bankruptcy

Chapter 12 bankruptcy is the part of the federal Bankruptcy Code for family farmers and family fishermen with regular annual income. You propose a plan to pay creditors in installments over three to five years, a trustee collects the payments and passes them to creditors, and a discharge at the end releases you from the debts the plan provided for.

It isn't open to everyone with a farm or a boat. Only a family farmer or family fisherman, as the Code defines those terms, can file it; the tests are below.

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By Ross Kilburn · Founder, American Default Research
Updated
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Where you’ll see the word

  • Your petition

    The filing that opens the case. The U.S. Courts explain that when a Chapter 12 petition is filed, an impartial trustee is appointed to administer the case.

  • The plan

    Due within 90 days after the order for relief, under 11 U.S.C. § 1221; the court can extend that for circumstances you shouldn't justly be held accountable for.

  • Payment notices from the trustee

    The trustee you pay is also the one who evaluates the case, the U.S. Courts explain, as in Chapter 13.

What the law calls it

  • Chapter 12 The short form, as the U.S. Courts write it. U.S. Courts
  • Adjustment of debts of a family farmer or fisherman with regular annual income The chapter's title in Title 11 of the U.S. Code. U.S. Code
  • Family farmer, family fisherman The Code's terms for who can file, in the U.S. Courts' explanation. U.S. Courts

What Chapter 12 means for you

Who can file depends on the legal eligibility tests. Under 11 U.S.C. § 109(f), only a family farmer or family fisherman with regular annual income may be a debtor under Chapter 12. The U.S. Courts explain the two categories, an individual or married couple and a corporation or partnership, and the debt test: at least 50% of your fixed debts for a farmer, 80% for a fisherman, must come from the farming or fishing operation, not counting the loan on your home unless that loan came from the operation. More than 50% of your gross income for the preceding tax year, or for farmers only, for each of the second and third prior tax years, must have come from the operation.

There's a debt ceiling too. For cases filed on or after April 1, 2025, total debts, secured and unsecured, can't exceed $12,562,250 for a family farmer or $2,568,000 for a family fisherman, the amounts set by the Judicial Conference's 2025 adjustment. That adjustment doesn't apply to a case filed before that date.

Three years is the default and five the ceiling. Under 11 U.S.C. § 1222(c) the court can approve a longer period for cause, but never more than five years. The U.S. Courts add one condition: unless the plan pays 100% of any child support and alimony claims, it must run five years and include all of your disposable income. Payments to secured creditors can sometimes continue longer than the plan itself.

Where to start is the bankruptcy court for your district, which the U.S. Courts' court finder locates by place or name. The U.S. Courts strongly recommend a qualified attorney, because bankruptcy has long-term financial and legal outcomes, and court employees and judges are barred by law from giving legal advice.

Questions about Chapter 12 bankruptcy

Why not Chapter 13 or Chapter 11 instead?

The U.S. Courts say Chapter 12 is more streamlined, less complicated and less expensive than Chapter 11, which is better suited to large corporate reorganizations, and that few family farmers or fishermen find Chapter 13 advantageous because it's designed for wage earners with smaller debts.

Does Chapter 12 wipe out every debt?

No. The U.S. Courts say certain categories of debts are not discharged in Chapter 12, and that the discharge comes after you complete all plan payments and certify that any domestic support obligations that came due have been paid. If you can't finish the plan for reasons beyond your control, an injury or illness that keeps you from working for example, the court may grant a hardship discharge.

Does Chapter 12 protect my house?

State or federal exemptions decide what property is protected in a bankruptcy case. The California Courts say California's exemptions protect a portion of your home equity, a car up to a certain value and basic household goods; Texas law exempts a homestead from seizure for creditors' claims, except for encumbrances properly fixed on it. Which state's exemptions apply depends on where you lived for the 730 days before filing, under 11 U.S.C. § 522(b)(3)(A).

Does filing stop collection calls and lawsuits?

Filing brings the automatic stay. The U.S. Courts say that as long as the stay is in effect, creditors generally can't start or continue lawsuits, wage garnishments or even phone calls demanding payment.

Free help with debt and bankruptcy questions

  • Credit counseling

    Nationwideconsumerfinance.gov

    The Consumer Financial Protection Bureau explains how nonprofit credit counselors help with debt and where to find one.

  • Legal aid

    Every statelsc.gov

    Nonprofit law offices give free civil legal help to people with low incomes. Our help directory lists the 120 offices the Legal Services Corporation funds.

Our pages that use it

Sources and method

This page uses none of our own data. The eligibility tests, plan length and discharge come from the Administrative Office of the U.S. Courts' Chapter 12 Bankruptcy Basics page and Title 11 of the U.S. Code, opened on Oct 22, 2026. The debt ceilings are the amounts for cases filed on or after April 1, 2025, from the Judicial Conference's adjustment notice in the Federal Register.

We write with assistance from AI tools. Figures come from the data and sources named on this page.