Dairy Farmers in Crisis Should Consider Chapter 12 Bankruptcy

27 Jun Dairy Farmers in Crisis Should Consider Chapter 12 Bankruptcy

Dairy farmers in Upstate New York are facing a crisis. While the cost of milk at the grocery store continues to climb, the price dairy farmers receive has not. Farmers are currently receiving $13.33 per hundredweight. This is $4.25 below the cost of production in New York, even in the most efficient dairy farms. Even the safety net Congress put in place, the MILC Program, isn’t enough to get farmers to the breakeven point.

Farm lenders are telling their customers that if they do not have lots of cash in reserve, they should sell off their herd and wait until milk prices come back up. Few farmers have enough cash reserves. Meanwhile, with so many dairy farmers going out of business and selling their herds, the prices paid for dairy cows have plummeted.

So what is a farmer to do? One option to consider is Chapter 12 bankruptcy. A Chapter 12 operates much like a Chapter 13 but with some much stronger modification provisions for mortgages. A farmer in a Chapter 12 can modify all of their secured loans, including their farm/home mortgages by lowering the principal balance to the actual value of the property, stretch it over a longer term AND lower the interest rate in many cases. (This provision, by the way, was similar to the bill that would have allowed all homeowners to modify their home mortgages in Chapter 13… which passed in the House but was defeated in the Senate).

Other than Chapter 12, there may be a glimmer of hope for farmers. Recently appointed US Senator from upstate New York, Kristen Gillibrand sits on the Senate Agriculture Committee, and has introduced legislation that would double the amount farmers can receive from the MILC program, and tie the MILC trigger price to inflation. She is also going to hold Agriculture Committee hearings in Washington and New York to discuss dairy pricing and other proposals to reform the system.

New York farmers in financial distress should do the same thing other stressed out New Yorker’s should do… consult with a knowledgeable bankruptcy lawyer to see what their options are.

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Peter Orville is a bankruptcy lawyer in Binghamton, located in the Southern Tier of New York. He is a member and New York co-chair of the National Association of Consumer Bankruptcy Attorneys.
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