Archive for the ‘Chapter 12’ Category

SCOTUS Grants Cert. for Chapter 12 Tax Case

Wednesday, June 15th, 2011

The Supreme Court granted certiorari to hear an appeal from a Ninth Circuit case involving whether a Chapter 12 debtor could essentially trap capital gains taxes in a Chapter 12 estate, and therefore, not have to pay all of the capital gains taxes. The name of the case is Hall v. U.S. and the Supreme Court case number is 10-895.

After filing a Chapter 12 bankruptcy, the debtors sold their farm for $960,000, incurring a capital gains tax of $29,000. They then sought to treat the capital gains taxes as unsecured debt incurred by the Chapter 12 estate. The lower court had authorized this treatment of the debt, but the Ninth Circuit reversed. It is noteworthy that the Supreme Court granted certiorari. The probable reason that certiorari was granted is to resolve a split in the circuits. Currently, the Eighth Circuit has ruled contrary to this, as has the Tenth Circuit Bankruptcy Appellate Panel.

Posted in Bankruptcy Cases, Chapter 12, Farm Bankruptcy | Comments Off

Milk Prices Yielding (Small) Profits for Dairies

Wednesday, June 16th, 2010

It looks like milk prices are starting to get a little better, which might be small consolation to dairymen who were pummeled by the twin forces of high feed and low milk costs last year. This story in the Business Journal indicates its going to be a long road back for a lot of these dairies to recover from last year.

Bankruptcy lawyers have learned a lot about dairies in the last year or so, because many dairies have been forced to seek bankruptcy protection. Small dairies can often file Chapter 12 bankruptcy to take advantage of many of the benefits offered to family farmers in bankruptcy. Chapter 12 is a debt restructuring plan that allows family farmers to propose a way to pay off creditors as they are able, instead of when the creditor demands it, which is often unrealistic.

Posted in Bankruptcy, Chapter 12, Fresno Bankruptcy | Comments Off

Senate Considers Allowing Small Businesses to File Chapter 12

Wednesday, April 14th, 2010

The Senate Judiciary Committee held a hearing entitled Could Bankruptcy Reform Help Preserve Small Business Jobs on March 17, 2010. The ideas presented at the hearing included a proposal to add a new category of entity that could file Chapter 12 (formerly reserved for family farmers and fisherman)–”small business enterprises.”

A small business enterprise would be defined as a small business with $10 million or less of debt where at least 50% of the debt had been incurred for business purposes. An exhaustive analysis of the proposal and proposed bill langauge can be found at http://judiciary.senate.gov/pdf/3-17-10%20Small%20Report.pdf.

This kind of proposal makes a great deal of sense for many reasons. First, it is rare indeed to find a Chapter 11 case that can be completed for less than $30,000 in attorney fees. A Chapter 12 case, on the other hand, might be able to be done for half of that on a fairly regular basis. Second, Chapter 13 would also be an inexpensive route, but the debt limits for Chapter 13 are so low that many small businesses do not qualify and Chapter 13 only applies to individuals, not LLC’s or corporations. Consequently, many small businesses that are incorporated (even those under the debt limits) do not qualify to file Chapter 13.

Opening up Chapter 12 like this makes a great deal of sense and the Senate should be encouraged to take up such a bill and to pass it.

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Posted in Bankruptcy, Business Bankruptcy, Chapter 11, Chapter 12, Chapter 13 | Comments Off