Legal Alert

House Bill Extends Chapter 12 Protection For Farmers

by Alan P. Fox, Esq.

The American Bankruptcy Institute reported the House on February 28, 2001 overwhelmingly passed legislation (H.R. 256) to extend chapter 12 bankruptcy protection to farmers an additional 11 months beyond its expiration on July 1, 2000. Rep. Nick Smith (R-Mich.) introduced the bill separately from the larger overhaul bankruptcy bill (H.R. 333) in the hope that farmers would have protection before they begin their spring planting. According to the American Bankruptcy Institute, the provision, which passed 408-2, applies to a farmers with debts of less than $1.5 million if 80 percent of the debts arose from the farming operation. The debtor must derive at least 50 percent of gross annual income from farming.

The American Bankruptcy Institute reported that Chapter 12 filings saw a significant decrease by falling 51.2 percent in the 12-month period from 834 in 1999 to 407 in 2000. This drop is mainly due to the expiration of chapter 12 under the Bankruptcy Code on July 1, 2000.

This number is small compared to the total number of bankruptcies filed during the 2000 calendar year which totaled 1,253,444, a decrease of 5 percent from the previous calendar year. For calender year 2000, there were 859,220 chapter 7 filings (a 7.3 percent decrease from the 927,074 filings from the same period in 1999) The next largest group of filings in 2000 was the chapter 13 filings at 383,894 (a rise of 0.4 percent from 382,214 in the 1999 calendar year). Chapter 11 filings increased 6.1 percent to 9,884 in calendar year 2000 (up from 9,315 in 1999).

Additional sponsors of H.R. 256 include: Rep. Baldwin, Shows, Dicks, and Peterson of Minnesota, Rep. Emerson, Sandlers, Rep. Holden, Dingell, Etheridge, Watkins, Riley, McHugh, Gillmor, and Jones of Ohio, and Rep. Schaffer, Ney, Otter and Farr of California.

This Alert was written by Alan P. Fox, Esq., Shareholder in Capehart Scatchard's Commercial Group. Should you have questions or like more information, please contact Mr. Fox at 856.914.2056, by fax at 856.235.2786, or by e-mail at afox@capehart.com.

© 2001 Capehart & Scatchard, P.A.