If you or your client meets the qualifications to file a Chapter 12 bankruptcy you will be able to take advantage of a very nice tax break not available in other bankruptcies. That is that capital gains tax liabilities incurred both before and after the Chapter 12 filing will be treated as non priority debt and can be discharged after the completion of the confirmed plan. This is huge because many times farmers have equipment and/or land that has little or no basis securing a large debt. If the farmer sells this property he will be liable for a large income tax liability and it could make the plan not feasible to secured creditors. However, in a Chapter 12 the secured creditors have a priority claim to the proceeds from sale of assets and the income tax is non priority. This makes a Chapter 12 proceeding very attractive to both the debtor and the secured creditor. The total amount of debt in a Chapter 12 cannot exceed $4,153,150. Details are covered in this article.
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