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Roger, Attorney
Category: Bankruptcy Law
Satisfied Customers: 30909
Experience:  BV Rated by Martindale-Hubbell; SuperLawyer rating by Thompson-Reuters
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Parent have filed Chapter 12 on family dairy farm. Its not

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Parent have filed Chapter 12 on family dairy farm. It's not going to work, 38-40 cows are gone from the 400 we claimed to have. What will happen when the decide to file chapter 7 and walk away from the dairy, Will they be responsible for missing cows?
Hi - my name is XXXXX XXXXX I'm a Bankruptcy litigation attorney. Thanks for your question.

If the case is converted from a chapter 12 to a chapter 7, it would be a complete liquidation of all assets and property; which means that they would have to discontinue their farming operation.

All secured lenders (lenders that have collateral) would be allowed to recover their property and sell it to pay on the debt. The unsecured creditors (lenders with no collateral) would likely receive little to nothing and their debts would be discharged.

As for the missing cows, if there is a lender with a lien on the livestock, it may demand an accounting or for your parent to prove that the cows haven't been transferred or sold without reporting it to the bankruptcy trustee or lender. However, if your parent can prove that the cows were either sold and payment remitted to the lender, or if there was an inaccurate count, or if there's no explanation other than it being just a mistake, it is likely that this would not be a huge issue - - because there would be no proof that your parent did anything wrong.

But, if your parent can show why the error occurred, that would certainly help the issue resolve faster.
Customer: replied 3 years ago.

if they sold it to continue operations of the dairy, like feed will that be ok? What will be the worst thing that can happen if they can not account for the cows?

In a chapter 12, the cost of continuing the operation is going to be there. Thus, that's to be expected. However, if the cows have a lien against them (by a lender), and they sold the cows without the court's permission, the trustee's permission or the lender's permission, then there could be trouble for your parent and also for the person that bought the cows.

This is so because mortgaged property was sold without respecting the lien holder's lien - - which the seller should know about and the buyer should check on (UCC search).

If this is what happened, the lender would have the right to sue your parent and the buyer to recover the value of the cows. This would generally be done through an adversary complaint in bankruptcy court. Thus, the worst case scenario is that your parent and/or the buyer would be required to repay the lender for the value of the collateral (cows) sold.

Please let me know if you have any additional questions related to this issue. Also, please positively rate our conversation so that I may receive credit for my research and response.


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