Recently, the American Farm Bureau Federation revealed that there was a 23 percent increase in farm bankruptcy filings for the 12 months period ending in March 2020, a figure that marks five consecutive years of such increases. Largely attributed to low commodity prices, natural disasters, and retaliatory tariffs, this increase could also be the result of the passage of the Family Farmer Relief Act, which was enacted last year, and raised the debt ceiling to $10 million.
Unfortunately, experts anticipate that these filings will continue and may actually increase in the next few months, with filings already accelerating since January, as farmers wait to see the extent of the coronavirus’ impact on the farm economy. To learn more about your own bankruptcy-related options as a farmer in Iowa, please contact our experienced Iowa Chapter 12 farm bankruptcy legal team today.
Chapter 12 Bankruptcy Filing Increases by Region
According to recently published data, Iowa saw the third largest increase in Chapter 12 farm bankruptcy filings in the country last year, preceded only by Wisconsin and Nebraska. In fact, more than 50 percent of Chapter 12 filings were in the Midwest region, which had 316 filings, up from 223 filings in the 12 month period ending in 2019. Although these numbers represent the state of affairs leading up to the COVID-19 outbreak, many expect the situation to worsen for family farmers, as the pandemic has resulted in the shutdown of millions of restaurants and school cafeterias, limiting sales across the state. For instance, the Iowa Farm Bureau reports that by mid-April, hog futures had fallen by 53 percent, while live cattle and cotton futures each fell by 25 percent.
Potential COVID-19-Related Challenges
While the farm economy continues to struggle through low commodity prices, uncertain trade demand, planting delays, crop losses, and reduced farm revenue, many experts believe that these obstacles will only continue to grow, with U.S. unemployment projected to reach 14.5 percent. This in turn, could result in a decline in off-farm income, making it much more difficult for small to medium sized farms to pay off a record $425 billion in debt.
While low interest rates are expected to help farmers meet their financial obligations in the coming months, many are expected to take advantage of the assistance offered by the Coronavirus Food Assistance Program, which set aside $16 billion for farmers who:
- Have suffered a five percent or greater price loss; or
- Are facing significant marketing costs due to COVID-19.
Although generally limited to a direct payment of $250,000 per person, corporations with up to three individuals engaged in farming could be eligible for up to three payment limits.
Filing for Chapter 12 Bankruptcy
Despite the injection of capital by the U.S. government, many family farmers will find it in their best interests to file for Chapter 12 bankruptcy, which allows eligible parties to enter into a repayment plan, making installments to creditors over a three to five year period. Fortunately, Chapter 12 bankruptcy does not have many of the barriers that others face when seeking to reorganize, but is a more streamlined, less complicated, and cheaper process than other forms of bankruptcy. Only those with regular annual farm income who can provide proof of certain debt thresholds can file for Chapter 12 bankruptcy, so if your own farm is in trouble or you have questions about your eligibility to file for bankruptcy, please contact our office today to learn more about your options.
Have Your Case Reviewed by an Experienced Chapter 12 Bankruptcy Lawyer
To speak with a dedicated Iowa bankruptcy lawyer about your own farm debt-related questions and concerns, please contact the Telpner Peterson Law Firm, LLP today by calling 712-309-3738 or by sending us an online message.