Chapter 11 Vs. Chapter 12 Bankruptcy

Chapter 11 and Chapter 12 bankruptcies aid businesses in overcoming insurmountable debts, but Chapter 12, available only to family farmers or fishermen, offers a simplified process and reduced court and legal expenses.

Function

Chapter 11 provides for reorganization of a business and its debt structure to reduce debts and eliminate burdensome contracts. Chapter 12 offers family farmers and fishermen an opportunity to create a plan to repay all or a portion of their debts.

Requirements

Chapter 11 is available to any corporation or partnership. Chapter 12 is typically only available to family farmers or fishermen who are majority owners of their businesses and make most of their money from farming or fishing (50 percent for farmers, 80 percent for fishermen).

Fees

The case filing fee for a Chapter 11 bankruptcy is $1,000, and $200 for Chapter 12. Both require a $39 administrative fee.

Plans

For larger corporations, a Chapter 11 reorganization plan may be very complex, but for smaller companies, particularly sole proprietorships, the plan is similar to Chapter 12 or Chapter 13. It consists of a plan for repayment of debts typically over three to five years.

Creditor Involvement

Creditors typically will not be able to influence repayment plans in a Chapter 12 case. In Chapter 11 cases, a committee of creditors plays a central role in many aspects of the bankruptcy, except in the case of small businesses.

References

• U.S. Courts: Chapter 12
• U.S. Courts: Chapter 11