Reorganizing a Farm Business with Chapter 12 of the Bankruptcy Code: A Brief Guide

Developed by Vermont Law School’s Center for Agriculture and Food Systems, "Reorganizing a Farm Business with Chapter 12 of the Bankruptcy Code: A Brief Guide" empowers farmers—and attorneys working with farmers—to transform and save farm businesses. Most bankruptcy cases are filed under chapter 7 of the Bankruptcy Code, which involves the complete sale of assets due to the debtor’s inability to pay debts. However, there are alternatives to chapter 7 bankruptcy that allow a business to continue operating free from significant debt burdens. Chapter 12 of the Bankruptcy Code is one such alternative that functions as a reorganization tool, intended to keep a farm in operation. Farm reorganization through chapter 12 is a powerful tool for farmers seeking to restructure burdensome debt, change production models, or even transition a farm to the next generation. It can help farming and fishing operations avoid financial distress and allow them to transform their operation or transfer it to the next generation—without requiring liquidation or financial insolvency. This guide covers who is involved, who is eligible, the benefits, and how it works.