How Chapter Twelve Bankruptcy Works

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A chapter twelve bankruptcy case begins by filing a petition with the bankruptcy court serving the area where the partnership or corporation has its principal assets or principal place of business, or where the individual lives. The debtor also shall file with the court, unless otherwise ordered by the court (1) schedules of liabilities and assets, (2) a schedule of current expenditures and income, (3) a schedule of unexpired leases and executory contracts, and (4) a statement of financial affairs. Fed. R. Bankr. P. 1007(b). A wife and husband may file individual petitions or joint petitions. 11 United States Code, Sub-Section- 302(a). (The Official Forms may be downloaded from the Internet at uscourts.gov/bkforms/index.html or bought at legal stationery stores. These forms are unavailable from the court.)


As of October 17, 2005, a case filing fee of two-hundred dollars and a miscellaneous administrative fee of thirty-nine dollars must be charged by the courts. Under normal circumstances and upon filing, the fees should be paid to the clerk of the court. However, they may be paid in installments with the permission of the court. 28 United States Code, Sub-Section- 1930(a); Fed. R. Bankr. P. 1006(b); Bankruptcy Court Miscellaneous Fee Schedule, Item 8. The number of such installments is limited to four and the debtor must make the final installment no later than 120 days after filing the petition. Fed. R. Bankr. P. 1006(b). For cause shown, provided that the last installment is paid not later than one-hundred and eighty days after the filing of the petition, the court may extend the time of any installment. The debtor may also pay the thirty-nine dollar administrative fee in installments. If a joint petition is filed, only one administrative fee and one filing fee are charged. A dismissal of the case may result if the debtor fails to pay these fees. 11 United States Code, Sub-Section- 1208(c)(2).

In order to complete the Official Bankruptcy Forms which make up the petition, schedules and statement of financial affairs, the following information must be compiled by the debtor:

1) A list of all creditors and the nature and amounts of their claims;

2) The amount, source, and frequency of the debtor's income;

3) A list of all of the debtor's property; and

4) A detailed list of the debtor's monthly living and farming expenses, i.e., shelter, food, taxes, utilities, transportation, feed, medicine, fertilizer, etc.

Married individuals must gather this information for each spouse regardless of whether they are filing separate individual petitions, a joint petition, or even if only one spouse is filing. In a situation where only one spouse files, the expenses and income of the non-filing spouse are required so that the trustee, the court, and the creditors can evaluate the household's financial position.

A impartial trustee is appointed to administer the case when a chapter twelve petition is filed. 11 United States Code, Sub-Section- 1202. In some districts, a standing trustee is appointed by the United States trustee to serve in all chapter twelve cases. 28 United States Code, Sub-Section- 586(b). As in chapter thirteen, the trustee both serves as a disbursing agent and evaluates the case, making distributions to creditors and collecting payments from the debtor. 11 United States Code, Sub-Section- 1202.

Filing the petition under chapter twelve (stops) "automatically stays" most collection actions against the debtor's property or the debtor. 11 United States Code, Sub-Section- 362. However, filing the petition does not stay certain types of actions listed under 11 United States Code, Sub-Section- 362(b). The stay requires no judicial action and arises by operation of law. As long as the stay is in effect, creditors usually can't continue or initiate any lawsuits, phone calls demanding payments, and wage garnishments. The bankruptcy clerk gives notice of the bankruptcy case to all creditors whose addresses and names are provided by the debtor.

Chapter twelve also contains a special automatic stay provision that protects co-debtors. A creditor may not seek to collect a "consumer debt" from any individual who is liable with the debtor, unless the bankruptcy court authorizes otherwise. 11 United States Code, Sub-Section- 1201(a). Consumer debts are those incurred by an individual primarily for a family, personal, or household purpose. 11 United States Code, Sub-Section- 101(8).

Between twenty to thirty-five days after the petition is filed, the chapter twelve trustee will hold a "meeting of creditors." If the U.S. bankruptcy administrator or trustee schedules the meeting at a place that does not have regular U.S. bankruptcy administrator or trustee staffing, the meeting may be held no more than sixty days after the debtor files. During the meeting the trustee puts the debtor under oath and both the creditors and trustee may ask questions. The debtor must answer questions and attend the meeting regarding the proposed terms of the debtor's repayment plan and the debtor's financial affairs. 11 United States Code, Sub-Section- 343; Fed. R. Bankr. P. 4002. If a wife and husband have filed a joint petition, they both must attend the creditors' meeting. The bankruptcy judges are prohibited from attending in order to preserve their independent judgment. 11 United States Code, Sub-Section- 341(c). The parties usually resolve problems with the plan either shortly after or during the creditors' meeting. Normally, the debtor can avoid problems by making sure that the plan and petition are accurate and complete, and by consulting with the trustee before to the meeting.

In a chapter twelve case, unsecured creditors must file their claims with the court within ninety days after the first date set for the meeting of creditors to participate in distributions from the bankruptcy estate. Fed. R. Bankr. P. 3002(c). However, a governmental unit, has one-hundred and eighty days from the date the case is filed to file a proof of claim. 11 United States Code, Sub-Section- 502(b)(9).

After the meeting of creditors, the chapter twelve trustee, the debtor, and interested creditors will attend a hearing on confirmation of the debtor's chapter twelve repayment plan.

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Although all information has been written in good faith and reviewed, please email us at [email protected] to report any inaccuracies.