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Understanding Family Farmer (Bankruptcy): Legal Definitions and Implications
Definition & Meaning
A family farmer is defined as an individual or couple engaged in farming whose total debts do not exceed $3,544,525. At least 50 percent of their non-contingent, liquidated debts must arise from their farming operations. Additionally, they must derive more than 50 percent of their gross income from farming for the year prior to filing for bankruptcy, or for each of the two years preceding that year.
Alternatively, a family farmer can also be a corporation or partnership where over 50 percent of the equity is held by one family or their relatives, and they operate a farming business. This entity must also meet specific debt and asset criteria related to farming operations.
Table of content
Legal Use & context
The term "family farmer" is primarily used in bankruptcy law, particularly under Chapter 12 of the Bankruptcy Code, which provides a streamlined process for family farmers to reorganize their debts. This legal framework is designed to assist family farmers in maintaining their farming operations while addressing their financial challenges. Users may find relevant forms and templates through services like US Legal Forms to help navigate this process effectively.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A couple owns a farm and has debts totaling $2 million, with $1.5 million arising from their farming activities. They earn 60 percent of their income from the farm. They qualify as a family farmer under bankruptcy law.
Example 2: A family-run corporation operates a dairy farm with debts of $3 million, where 90 percent of their assets are tied to the farm. They meet the criteria to file for bankruptcy as a family farmer. (hypothetical example)
Relevant laws & statutes
The primary statute governing family farmers in bankruptcy is found in Chapter 12 of the Bankruptcy Code (11 U.S.C. § 1201 et seq.). This chapter specifically addresses the unique needs and circumstances of family farmers facing financial distress.
Comparison with related terms
Term
Definition
Key Differences
Family Farmer
An individual or entity engaged in farming with specific debt and income criteria.
Focuses on farming operations and income derived from them.
Small Business
A privately owned corporation, partnership, or sole proprietorship.
Not limited to farming; broader category including various industries.
Individual Debtor
An individual filing for bankruptcy without specific business criteria.
Does not require income from farming or meet debt thresholds specific to farming.
Common misunderstandings
What to do if this term applies to you
If you believe you qualify as a family farmer facing bankruptcy, consider the following steps:
Gather documentation of your debts and income from farming.
Consult with a legal professional who specializes in bankruptcy to understand your options.
Explore US Legal Forms for templates and resources to assist in filing for bankruptcy.
Complex cases may require professional legal assistance to navigate effectively.
Find the legal form that fits your case
Browse our library of 85,000+ state-specific legal templates.