I have written in the past about a little known section of the Bankruptcy Code – Chapter 12. Chapter 12 of the Bankruptcy Code was developed in the 1980’s specifically for family farmers and family fishermen. There is a new article out in the December 2017 American Bankruptcy Institute Journal, called “Making Chapter 12 More Viable for Family Farmers.”
Quick History of Chapter 12 Bankruptcy
With great precision, the author, Jeffrey Coe of Mesch Clark Rothschild, P.C., Tuscon, AZ, details the origins of Chapter 12 of the Bankruptcy Code. Chapter 12 arose in the 80’s when a confluence of factors put farmers in America on “the edge of a financial cliff.” In the 1970’s, a rise in farm exports, commodity prices and land values resulted in family farmers opening up larger and more expensive farming operations to keep up with demand. When this demand dropped in the 1980’s, the expense of running the larger operations and the interest rates did not drop with them. This left farmers scrabbling to reorganize their debt and Chapters 11 and 13 were not well suited to this effort. In creating Chapter 12 specifically for family farmers, Congress was specifically acknowledging the special place farmers hold in our society and economy.
Requirements for Filing Under Chapter 12
Chapter 12 contained two qualifying requirements. Debt limit for the farmer must be below approximately 4 million and at least 50% of the farmer’s income must come from the farming operation in order to qualify for Chapter 12 relief. Mr. Coe makes a strong argument in his article that is it now time for Congress to continue its work helping farmers by raising the debt limit in Chapter 12 and reducing the amount of farm income required to qualify.
His article contains fascinating statistics about the current health of the farming industry and points out, while not to the same degree experienced in the 1980’s, our farmers are again experiencing pressure from lower exports and prices while facing increased expenses. However, one of Mr. Coe’s points in the article was encouraging to me: most farms in America continue to be operated by family farmers. This is a welcomed observation for those of us who have feared corporate farming operations would put the “little guy” out of business.
It’s Time for a Change
Based upon the well-reasoned arguments in the article, it is time for Congress to raise the debt limit in Chapter 12. It’s time to rework the income from the farming operations component of qualification for relief under the chapter. The article should be available for online viewing in January 2018 as the American Bankruptcy Institute Journal publishes its archived version online a month or so after print publication. I would encourage everyone to read this particular article. You may not be a Chapter 12 bankruptcy attorney, but the facts gathered by Mr. Coe on the current farming environment in America are fascinating and informative.