26 Aug Chapter 12 Farm Bankruptcy Helps Family Farmers Keep Their Farms
Chapter 12 Bankruptcy is a powerful tool for operators of small farms to resolve their debt problems. Farming and debt often go hand in hand. This is particularly true for New York dairy farmers. They are being paid 20 percent less for unprocessed milk than they received in 2008 – even while milk prices at the store are going up. ManyNY dairy farmers are on the brink of losing to foreclosure their herd, their equipment and their farms.
Until recently, the number of farm bankruptcies filed in the Northern District of New York has remained low. In 2009 and 2010, however, the number of Chapter 12’s filed has increased over 150 percent. Most farmers who file forChapter 12 are taking advantage of the unique provisions that allow farmers to modify any and all of their secured loans. This includes modification offarm/home mortgages and the loans secured bycows, crops and equipment. Chapter 12 farmers can lower the principal balance of these loans to the actual value of the property. They can also stretch the term of the loan over a longer period and they can often lower the interest rate of the loans. The resulting loan payments are usually drastically lower than what was previously demanded, allowing the farmer to afford to keep his/her farm.
To be eligible to file Chapter 12, a debtor must be a family farmer (or family fisherman) who isnow or has recently beenactively engaged in farming (or fishing) operation. Their debts must be under about $3.2 million and their gross income must be at least 50 percent from farming (or fishing).
While Congress tried tomake it harder for many consumers to file bankruptcy when they changed the bankruptcy law in 2005, they actually improved the benefits for farmers.
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