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A new law helps more farmers qualify for Chapter 12 protections

Farmers across the country are struggling to keep their farms afloat. The growing debts that many farms face may be caused by a variety of factors that farmers cannot control, such as severe weather and market changes.

If you are falling behind with bills, you are not alone. The farm sector is over $426 billion in debt, according to media reports. The agriculture industry has not seen this amount of debt since the agriculture crash of the 1980s.

Chapter 12 bankruptcy can provide relief

Because of the steep debts many farmers face, bankruptcy is also on the rise for farmers. The number of farmers who are filing for Chapter 12 bankruptcy is up about 13 percent over last year, according to The National Law Review.

Chapter 12 bankruptcy is popular among struggling farmers because it provides protections that specifically target their needs. This type of bankruptcy was designed for family farmers who have fallen on hard times. It allows them to reorganize debt to avoid having to sell off or foreclose on assets.

Some advantages to a Chapter 12 bankruptcy include:

  • You can make payments seasonally
  • Filing only costs $275
  • You will have a longer repayment window than you would with other types of bankruptcy
  • Creditors may have less ability to challenge sales of land or equipment
  • You may pay creditors based on the current value of collateral in your home, instead of how much you owe on your mortgage
  • If you cannot complete your repayment plan because of illness or natural disasters, you may be eligible for a hardship discharge

A new law helps more farmers qualify

Although Chapter 12 bankruptcy has been around since 1986, a new law passed in August, which makes this type of bankruptcy even more beneficial to farmers. The Family Farmer Relief Act of 2019 extends the debt limit for Chapter 12 bankruptcy filings from $4.3 million to $10 million.

This reflects the changes that family farms have experienced since the 1980s. Today, there are fewer farms, but they are typically much larger than most farms were in the 1980s. With the increased debt limit, more farmers will be able to qualify for Chapter 12 protections.

Chapter 12 bankruptcy may not be the best way to address every farmer’s debts. However, in certain situations, it can be a beneficial tool to help farmers get back on their feet.

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