On Monday, Caddell Reynolds helped a large blackberry farm file for Chapter 12 Bankruptcy in the United States Bankruptcy Court. This farm will have protection from creditors while a plan for reorganization of its liabilities and assets is formulated.
Joel Hargis of Caddell Reynolds has been filing Bankruptcy for farmers across the state in ever increasing numbers. This seems to be building a trend especially in Arkansas’s largest group, the poultry farmer.
Farms Filing for Bankruptcy Greatly Increased
The Farm Bureau Federation reports that the number of farms that have filed for bankruptcy is up 24 percent from just last year. To compound matters, total farm debt for 2019 is expected to reach a record high of $416 billion.
For the first quarter of 2019, 2.5 percent of commercial real estate loans in agriculture were more than 30 days past due. This is 2.1 percent more than the quarter prior to that. (The historical average is 2.1 percent.) Additionally, 2.3 percent of non real estate loans in agriculture held by commercial lenders were more than 30 days past due. This is 1.5 percent up from the prior quarter as well as above the historical average of 1.7 percent.
Multiple Factors Contributed to Farms’ Financial Troubles
According to Dale Moore, vice president of the American Farm Bureau Federation, an independent nonprofit for farmers around the country, this is due to multiple factors. In just the past six years, Moore says that net farm income is down by almost half of what it was. This is due to many things as well, such as trade wars, tax and regulatory reform, and extreme weather (floods, freezing, fires, hurricanes, etc.).
A large portion of this year’s farm income has come from government subsidies and payments, since Mother Nature has failed to be too kind over the past year.
States Across the Country Fare Differently
Through June 2019 and the 12 months prior, a total of 535 farms filed for Chapter 12 Bankruptcy, up 13 percent (60 bankruptcies). While Delaware, Nevada, New Mexico, New Jersey Oregon, and Rhode Island had no Chapter 12 bankruptcies in the past year, Kansas, Minnesota, and Wisconsin led the nation in the same. When looking at Chapter 12 bankruptcies by region, every region increased but for the Southeast, although the region still saw a large number of bankruptcies filed. The Midwest and Southeast regions had the highest number of filings, with 240 and 100 in the past year respectively.
Under the Family Farmer Relief Act, more farmers now have the opportunity to qualify for Chapter 12 Bankruptcy, since the cap was raised the debt limit from $4.1 million to $10 million.
How Chapter 12 Bankruptcy Can Help
Under chapter 12, debtors propose a repayment plan, much like in a Chapter 13, to make installments to creditors over three to five years.
Generally, the plan must provide for payments over three years unless the court approves a longer period of time. Chapter 12 is much more streamlined, much less complicated, and considerably less expensive than Chapter 11 – making it much more financially feasible and manageable than a Chapter 11.
In other words, payments can be made while the farmer or fisherman is earning money.
If you are considering filing for bankruptcy, the experienced and compassionate Arkansas Bankruptcy Attorneys at Caddell Reynolds can help you to figure out your best options and move forward.
We examine the facts of your case individually and will walk you through each step of the legal process. Call Caddell Reynolds today at 866-853-6020 for a FREE Legal Consultation.