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To obtain: There must be filing of a financing statement, centrally, with Sec. of State (under prior law filing was, local, in the county courthouse for the county where crop was growing, – See, IC 26 -1-9.1- 501 ) New Law!!
-- at least 30 days before the “crop matures.”
-- A crop-share tenant owns a crop until it comes out of the field under common law!
A “landlord’s lien” has priority over liens filed subsequent to it -- including UCC liens.
But, a non-consensual lien is inferior to a prior UCC lien,
and will be avoided in bankruptcy !
Note, a tenant need not consent (has not consented) to this statutory lien .
It is like all other non-consensual liens compared to a UCC (Art. 9) consensual lien.
A “landlord’s lien” in Indiana is more an emergency lien than a planning tool or a safety net.
Mechanic’s Lien -- also statutory - Non-consensual -
Extends to the actual improvement and real estate it stands on, and is
available to contractor(s), subcontractors and materials suppliers.
It must be filed within 60 days of the last service or materials provided if for a 1 or 2 person residence—a “Class 2” structure (as defined in IC 22-12-1-5), otherwise within 90 days of the last service or materials provided.
A suit must be brought within a year or the lien is null and void.
Lower than expected incomes may bring insolvency to anyone who borrows.
Bankruptcy allows an individual or a business a “fresh start” (albeit with a taint) by paying into court, the available and non-exempt assets for the satisfaction of creditors according to a priority of interests .
Note: detailed steps for bankruptcy are at: http://www.bankruptcyaction.com/questions.htm#p
B. Other realty or tangible personal property $8,000
C. Intangible personal property $300
Professionally prescribed health aids
Tenant by the entireties interests on the date of the petition unless the spouse of the bankrupt is in a joint or separate bankruptcy petition.
Money in a medical savings account.
Must exempt certain pension & retirement benefits covered under a federal statute .
* S ee IC 34-55-10-2, Amended by legislation in 2005, for more details.
available at: http://www.state.in.us/legislative/ic/search.html and
Information on Exemptions for other states is at: http://www.bankruptcyaction.com/inexemptions.htm
Federal Exemptions – not an option in Indiana.
The exemption for a homestead is limited to $125,000 if the property was acquired within the previous 1215 day (3.3 years). The cap is not applicable to any interest transferred from a debtor's previous principal residence (which was acquired prior to the beginning of such 1215-day period) ;
The value of the state homestead exemption is reduced by any addition to the value brought about on account of a disposition of nonexempt property made by the debtor (made with the intent to hinder, delay, or defraud creditors) during the 10 years prior to the bankruptcy filing.
Chapter 13 - consumer bankruptcy reorganization repayment plan
Debt limits are substantial, but only for individuals/sole proprietors in business—not corporations or partnerships.
-- general for consumers to have supervision invoked in their financial lives,
-- to get extended terms so they may be able to “cash flow.”
New Bankruptcy Law -- effective on October 17, 2005: The major intent of bankruptcy reform is to require people, who can afford to make some payments towards their debt, to make these payments, while still affording them the right to have the rest of their debt erased. These people MUST file Chapter 13.
-- else the business may end up in a Ch. 7 liquidation.
Farmers in Ch. 11 often find it impossible to get a plan approved because of the requirement to satisfy certain creditors under Ch.11 rules.
Chapter 12 Family Farm Bankruptcy Act became law in 1986 with requirements so that a “typical” farm could get a reorganization plan approved.
Chapter 12 offers a farmer (and now fishermen) the opportunity to reorganize with a plan for the creditors that offers at least as much as they would get if the debtor were in a liquidation bankruptcy.
Chapter 12 Farm Bankruptcy under revised permanent law
1.-- Individual, or individual and spouse in a farming operation whose aggregate debts does not exceed $3.237 million (indexed, CPI) with
2.-- 50% of this debt excluding principal residence arising out of the farming operation owned or operated by the petitioning debtor, and
3.-- with 50% of the gross income in the year prior to filing from farming or 2 and 3 years prior to filing (an extension of time under the 2005 Act to allow for the reality that farmers in financial stress make adjustments before filing).
Chapter 12 Farm Bankruptcy-- under revised permanent law—The Rules
A farm corporation or partnership must meet each of the following criteria as of the date of the filing of the petition.
More than one-half of the outstanding stock or equity in the corporation or partnership must be owned by one family or by one family and its relatives.
The family or the family and relatives must conduct the farming operation.
More than 50% of the value of the corporate or partnership assets must be related to the farming operation.
The total indebtedness of the corporation or partnership must not exceed $3.237 million.
Not less than 50% of the corporations or partnerships total debts which are fixed in amount must come from the farming operation owned or operated by the corporation or partnership.
If the corporation issues stock, the stock cannot be publicly traded.
-- A key to Chapter 12 relief at least in the past is that mortgaged land is re-valued in a plan at the “current value.” This was huge in the mid to late ‘80’s when land values dropped substantially from 1981 to 1987! What now in 2005?
--- That is, marked down with the difference between secured amount and current value being essentially “written-off,” and the lower value amortized in a Chap. 12 plan.
-- The farmer must be able to show a regular income sufficient to service the “restructured” debt in the plan.
--- In many cases, the income is fortified by off-farm income.
--Upon completion of a 3 or 5 year plan, the debtor is/maybe discharged from unsecured debts .
--Long term financing arrangements continue –
During a plan, there may be “extra” income to pay toward claims that are not otherwise allowed in a plan –”Disposable income”– but the bankrupt may use this money to “maintain” the farm operations rather than make it available to unsecured debt owed under “the plan” after a 10% trustee fee.
“ Disposable Income” is defined as income which is not reasonably necessary for the maintenance or support of the debtor or his/her dependents or for the payment of expenditures necessary for the continuation, preservation, and operation of the debtor’s business.
Note, the interpretation and litigation relating thereto could be a course paper topic. (see Susan Schneider’s paper for cites on this topic.
Note, like the Welch case, the problem presented in financial stress situations, is the farmer in financial stress often cuts back his farming activity in an effort improve financially, i.e., he or she or they,
-- takes an off-farm job(s)
-- rented out, and sells his livestock and equipment.
Thus, when bankruptcy is a necessary option, to keep the land, Ch.12 may not be available because “debtor” has abandoned an active “farmer” status and fail the 50% gross income test in the prior year.
2005 Act may help with this dilemma since 2 nd and 3 rd prior years may be considered for the 50% test.
“ Rule:” Plan carefully when in financial stress!
Mary Freese Farms, Inc. U.S. Bankruptcy Ct. N.D. Iowa ‘87
Action ? Amanda
To bar or dismiss Freese Corp. from Ch. 12
Is Freese eligible for Chap. 12
Facts : Baxter and Mary Freese, and children own the stock in a farm corporation.
The interest rate is reduced depending on how much of the property's appreciation you bargain away. For example:
Standard 30 Year Fixed Rate Mortgage: 8.00% SAM w/20% Appreciation given to investor: 7.50% SAM w/30% Appreciation given to investor: 7.00% SAM w/40% Appreciation given to investor: 6.50% SAM w/50% Appreciation given to investor: 6.00%
*In fact, by the end of the 80’s the farm credit lenders were essentially compelled to “restructure” farmers with bankruptcy potential and provide essentially a mark down in debt to repay like a Chap. 12 but save the expense and stigma of a Chap. 12, but SAMs were part of the deal.
At the expiration of these SAM agreements the farmer debtor often could not show the he or she could finance the amount added to the debt from the SAM agreement, and may have been forced to cease business.
An SAA is a contract between FmHA/FSA and the borrower in which the borrower promises to pay a certain amount of money in the future if the property securing the agreement increases in value, allowing FmHA/FSA to "recapture" all or a portion of the write-down amount.
As of late 1988, whenever a farm loan borrower receives a write-down of debt owed to the Farmers Home Administration (FmHA) - now the Farm Service Agency (FSA) - the borrower must sign a Shared Appreciation Agreement (SAA). At the same time, the borrower usually also signs a mortgage or other security agreement securing the SAA.
E.g., 10 years after the initial SAAs agreement, the borrowers were required to add a part of the appreciation to their debt—add it to the principle, or pay over the amount– agreed share.
FSA regulations list a number of "trigger" events that require payment under the SAA:
1. Transfer of security property (other than to spouse upon death of the borrower).
2. You stop farming and stop receiving farm income, including lease income.
3. You pay the debt in full.
4. Acceleration of the written-down debt. [This trigger was added on March 10, 1998.]
If none of these trigger events occur within ten years after the write-down, the SAA will "expire" on the ten-year date. (Beginning August 18, 2000, the maximum term for all new SAAs is five years.)