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How common are Chapter 12 bankruptcy filings?

One way to monitor America’s agricultural industry is to look at Chapter 12 bankruptcy figures. Seeing how many farmers are reorganizing their debt can offer insight into the choices these business owners are making, and the challenges they face.

Some recent numbers indicate there are positive signs, particularly for Florida’s farmers. But the overall picture suggests we may be in a period of unpredictability.

Bankruptcies drop, but the bankruptcy rate goes up

An analysis by the American Farm Bureau Federation looked at all Chapter 12 bankruptcy filings in the U.S. in 2018. The total number, 498, was a very small drop from the year before. However, the bankruptcy rate might be more telling.

If there are fewer farms overall, the number of Chapter 12 filings will represent a larger proportion of the total farms. The analysis found the bankruptcy rate per 10,000 farms climbed slightly from 2017 to 2018, making it four consecutive years where the bankruptcy rate among farms increased.

Farm bankruptcies in Florida

The Midwestern U.S. – where dairy, corn and wheat farmers are concentrated – accounted for many of the increases in Chapter 12 bankruptcy filings in 2018. In Florida it was a different story.

There were four Chapter 12 bankruptcies in Florida in 2018, among the lowest totals in the country. However, 2017 saw 15 such farm bankruptcies in the state, representing a swing of 11 filings from one year to the next.

What it all means

These figures make two things clear. First, that this continues to be an unpredictable time for America’s farmers. One year everything may seem fine, then the next year abruptly is not. Are we entering a period where this volatility is the new normal?

Secondly, we can see that Chapter 12 bankruptcy isn’t really out of the ordinary. Instead, it’s an option hundreds of struggling farmers across the U.S. are taking advantage of every year, giving them the opportunity to regain control of their business.

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