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Chapter 12 Debtor and Trustee Powers

Chapter 12 provides that a standing trustee will be appointed in each case, but in the ordinary course, actual operation of the farm will remain with the debtor. Additionally, the debtor, as debtor in possession, has all rights, responsibilities, and powers, as would a debtor in possession under Chapter 11. Chapter 12 does not provide for the appointment of creditors’ committees.

Chapter 12 Debtor Powers

The Chapter 12 debtor is given broad authority to operate the farm business. The debtor may convert his or her case to a case under Chapter 7 at any time. The debtor pays the Chapter 12 trustee. In addition to the plan payments, the debtor must pay 10 percent of all such payments to the trustee. This payment must be made at the time of the plan payment. After payments under the plan have totaled a certain sum, the trustee payment is reduced. On request of a party in interest and after notice and a hearing, the court may dismiss a case for cause. Cause includes fraud, dishonesty, incompetence, or gross mismanagement of the affairs of the debtor, either before or after the commencement of the case.

Chapter 12 Trustee Powers

Chapter 12 requires that a trustee be appointed. Except as otherwise provided in the plan, the trustee makes all payments under the plan. Although the farmer remains in control of the property, the trustee maintains important functions. Where fraud or gross mismanagement on the part of the debtor is shown, a creditor or the trustee may move to have the trustee placed in control of the farm. Under Chapter 12 the trustee is directed to do the following:

    • receive and be accountable for property and payments turned over by the debtor;

 

  • object to the allowance of improper claims;

 

 

  • make recommendations regarding the discharge of the debtor;

 

 

  • provide information to interested parties;

 

 

  • investigate the financial affairs of the debtor for cause;

 

 

  • investigate the operation of the farm and analyze the feasibility of continuing the business;

 

 

  • participate in valuation and confirmation hearings;

 

 

  • ensure that the debtor makes timely payments under the confirmed plan; and

 

 

  • appear and be heard at any valuation hearing, confirmation or modification hearing, or any hearing involving the sale of property of the estate.

 

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