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Should farmers consider filing for Chapter 12 bankruptcy?

The United States is approaching uncertain financial times once again. The outcome of some trade wars with foreign governments can have a negative effect on America's farmers and their ability to get top prices for their harvests.

This trickle-down effect can put farmers who are already hovering on the financial brink right into the hole. Here in Florida, farmers also are at the mercy of the weather. If 2019 proves to be a busy hurricane season for the Southeast, farmers' finances may become even more vulnerable in the face of crop losses.

If you are a Florida family farmer, you may be worried about the future of your farm and your ability to continue to provide for your family. That's understandable, but you have some options to consider to salvage your family farm.

One of those options is to file for Chapter 12 bankruptcy. This, of course, should not be the first debt solution you seek. However, at a certain point it may be the only one that makes good fiscal sense.

It's important to understand that Chapter 12 filings were designed for owners of small-to-medium-sized family farms who earn their regular annual income in the agriculture industry. When financially distressed farmers find themselves underwater financially, they have the option of devising a plan that restructures their debt loads and establishes a viable plan to repay their debts in installments over a three- or five-year period.

In most cases, courts approve three-year plans, but have the discretion to approve the longer terms when the debtor proves cause. The exception to this is if the plan includes paying spousal and/or child support. In those cases, all arrearages claimed must be repaid within five years using all disposable income of the debtor.

If you are still unsure whether this option would be a good one for you, we can review your options, assess your financial situation and offer a recommendation.

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