Major Developments In Chapter 12 Bankruptcy

In the most far-reaching revision of bankruptcy law since 1978,1 Congress has passed and the President is expected to sign legislation making major changes in bankruptcy law.2 With respect to agriculture, the changes are principally in two areas – (1) amendments to the eligibility requirements for Chapter 12 filing and (2) modification of the income tax treatment of gains on property liquidated in connection with a Chapter 12 bankruptcy reorganization. A third major area of importance is that the homestead exemption is limited to $125,000 if the debtor purchased the residence less than three years and four months (defined as 1215 days) before filing.3 There are exceptions for- (1) the residence of a “family farmer” and (2) any amount rolled over from another residence acquired by the debtor before the 1215 day period provided the prior and current residences are located in the same state.