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Chapter 12 bankruptcy is often called as family farmer bankruptcy or family fisherman bankruptcy. This is designed to meet the needs of family farmers and family fishermen experiencing financial crisis. Bankruptcy law caters to different needs of different individuals, thus, chapter 12 aims to help another category of condition. In chapter 12 bankruptcy , the debtors are required to offer a repayment plan that will enable them to repay their creditors over a period of three to five years time. In some cases following bankruptcy law , the duration may be lengthened by a bankruptcy court if just cause is exhibited. As with the cost of chapter 12 , it is less expensive than a chapter 11 which suits large corporations.

According to the US Courts, under the Bankruptcy Code, “family farmers” and “family fishermen” fall into two categories: (1) an individual or individual and spouse and (2) a corporation or partnership. Farmers or fishermen falling into the first category must meet each of the following four criteria as of the date the petition is filed in order to qualify for relief under chapter 12 :

1. The individual or husband and wife must be engaged in a farming operation or a commercial fishing operation.

2. The total debts (secured and unsecured) of the operation must not exceed $3,544,525 (if a farming operation) or $1,642,500 (if a commercial fishing operation).

3. If a family farmer, at least 50%, and if family fisherman at least 80%, of the total debts that are fixed in amount (exclusive of debt for the debtor’s home) must be related to the farming or commercial fishing operation.

4. More than 50% of the gross income of the individual or the husband and wife for the preceding tax year (or, for family farmers only, for each of the 2nd and 3rd prior tax years) must have come from the farming or commercial fishing operation.

In order for a corporation or partnership to fall within the second category of debtors eligible to file as family farmers or family fishermen, the corporation or partnership must meet each of the following criteria as of the date of the filing of the petition:
1. More than one-half the outstanding stock or equity in the corporation or partnership must be owned by one family or by one family and its relatives.

2. The family or the family and its relatives must conduct the farming or commercial fishing operation.

3. More than 80% of the value of the corporate or partnership assets must be related to the farming or fishing operation.

4. The total indebtedness of the corporation or partnership must not exceed $3,544,525 (if a farming operation) or $1,642,500 (if a commercial fishing operation).

5. At least 50% for a farming operation or 80% for a fishing operation of the corporation’s or partnership’s total debts which are fixed in amount (exclusive of debt for one home occupied by a shareholder) must be related to the farming or fishing operation.

6. If the corporation issues stock, the stock cannot be publicly traded.