Bankruptcy Costs under Chapter 12

摘要

Chapter 12 bankruptcy, Adjustment of Debts of a Family Farmer With Regular AnnualIncome, will expire on October 1, 1993, unless Congress intervenes. Chapter 12 imposes certain economic costs, referred to as bankruptcy costs and considered deadweight losses to the economy. The magnitude of these costs is an important element in the debate to renew or extend Chapter 12. Based on White's model of indirect bankruptcy costs, total bankruptcy costs under Chapter 12 may be between 90 and 100 percent of the value of farm assets at the time of filing. This cost compares with estimates of 54 to 60 percent for farms and other businesses filing for reorganization under Chapter 11 of the U.S. Bankruptcy Code.