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Farm bankruptcies rise in 2025, ag attorney urges early financial reviews for 2026

An ag attorney says as farm bankruptcies increase across the Midwest, proactive financial reviews could be a critical risk management strategy.

Joe Peiffer with Ag and Business Legal Strategies says reviewing terms and tracking expenses could help farmers avoid loan defaults.

“If things aren’t going to work in a restructuring mode, they might have to look at potential liquidation of assets,” he says. “You could have depreciation recapture on the sale of equipment. But if you’re dealing with the sale of a farm, you’re going to have potentially have to deal with long-term capital gains.”

A recent report from the American Farm Bureau Federation showed a 46 percent increase in Chapter 12 bankruptcies from 2024.

But, Peiffer tells Brownfield it could also be used as a tool to help restructure debt.

“There are provisions in Chapter 12 that allow a farmer to avoid paying the income taxes that can arise when they have to sell farm assets,” he says. “Chapter 12 could be the answer to help you get a fresh start.”

Peiffer says early planning and regularly monitoring balance sheets could help farmers better prepare for the upcoming crop year.

AUDIO: Joe Peiffer, Ag and Business Legal Strategies