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Raising debt limits allowed more farms to access Chapter 12

A farm bureau economist says bankruptcy law changes in the last year are partially behind a 20 percent year-over-year increase for farms declaring Chapter 12.

John Newton tells Brownfield provisions in the Family Farmer Relief Act raised the debt limit on eligibility requirements for Chapter 12 Bankruptcy to $10 million which allowed larger family farms to utilize it as an option in 2019.

“Prior to this modification in the law, the debt ceiling was around $4 million and so if you had more than $4 million in debt you were likely looking at Chapter 11 Bankruptcy.”

He says family farms taking this option have at least 50 percent of their income coming from the farm, farming is their principal occupation, and they meet other criteria set by the courts.

Newton says filing for bankruptcy provides an option to save the farm and pay off debt.

“Restructure that debt and meet your credit obligations.”

He also believes if it weren’t for the Market Facilitation Program, there would be even more farmers exploring bankruptcy options after five years of limited incomes.