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  4.  » 3 reasons farmers decide to turn to Chapter 12 bankruptcy

3 reasons farmers decide to turn to Chapter 12 bankruptcy

There are numerous types of bankruptcy available to those who run businesses, such as family farms. Organizations can pursue multiple different types of bankruptcy depending on their current circumstances and what they hope to achieve via a bankruptcy filing.

Family farmers are among those who may struggle with debt at times, despite otherwise running a successful business. Many agricultural professionals concerned about business debts will consider filing a Chapter 12 bankruptcy. If successful, that filing could help discharge certain debts while protecting the land and other valuable assets that allow them to farm. Here are some of the reasons why a family farmer might decide to pursue a Chapter 12 bankruptcy.

Significant medical debt

Unlike those who work as an employee somewhere, independent farmers may not have any sponsored health insurance options. Some people make the choice to simply put aside some money for healthcare in case they require treatment.

That approach may work for a simple injury, like a broken bone, but it could lead to massive financial issues if someone has cancer or other highly expensive medical concerns. While Chapter 12 bankruptcy does require that much of someone’s debt comes from the farm’s operations, other debts could be what ultimately pushes a farmer to file.

A divorce

Much of your property is at risk in a divorce situation, including your farmland. When you have to share the value of your agricultural enterprise with your spouse, you may have few choices but to try to completely rework the budget, which may involve a bankruptcy filing.

A couple of bad years on the farm

Having a crop fail once can mean a very lean year for any farming family that has been affected. Several years of substandard harvests, blights or drought can leave a farmer unable to pay their basic operating expenses.

Perhaps the property where you work is at risk of foreclosure due to missed payments. Maybe you have fallen behind on vehicle or farm equipment payments, which puts you at risk of collection activity because the equipment or a vehicle serves as the collateral for the loan.

A Chapter 12 bankruptcy could help a struggling farmer renegotiate their financial obligations while preserving their most valuable assets and keeping their farm operational. Recognizing that your situation may align with one of the more common reasons for Chapter 12 bankruptcy proceedings could help you make choices that will benefit you and your farm in the long term.