Chapter 12 is a reorganization proceeding available only to “family farmers” and, from 2005 on, “family fishermen.” Congress enacted chapter 12 after concluding that chapter 11 was inefficient and burdensome for most family farmers, many of whom owed too much debt to qualify for chapter 13. To be eligible for chapter 12, the debtor’s aggregate debt must not exceed $3,237,000 for farmers or $1,500,000 for fishermen and most of the debtor’s income must come from farming or fishing operations. In chapter 12, the debtor’s assets are not liquidated. Instead, the debtor pays debts, in whole or in part, through a plan that must be confirmed in accordance with specific statutory criteria.

A chapter 12 debtor, referred to as the “debtor-in-possession,” remains in control of its assets. A trustee, however, is appointed. The debtor-in-possession pays the trustee, who makes payments to creditors pursuant to the confirmed plan. Chapter 12 debtors get a “fresh start” by obtaining a discharge from pre-confirmation debts that are provided for in the plan or that are not “allowed” by the Code. In chapter 12, as in chapter 11, an individual debtor may be discharged only from types of debt that are dischargeable in a chapter 7. Moreover, except for certain unusual cases, a discharge is granted in chapter 12 only after the debtor has successfully completed the payments prescribed by the plan.