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US Bankruptcies are on the rise

By: Jake Putnam
Published in Podcast on  August 06, 2019

Following years of low farm income, bankruptcies are on the rise. The American Farm Bureau Federation says delinquency rates are above the historical average and trending in the wrong direction. The AFBF's Allison Wilton, says the number of Chapter 12 bankruptcies is rising significantly.

Since June 2018, there were a total of 535 Chapter 12 bankruptcy filings. This is an increase of 13%. States in the Midwest, such as Kansas, Minnesota and Wisconsin, had the highest number of filings and the Midwest overall had a total of 240 filings, the highest in the nation.

Wilton says the depressed farm economy is driving the uptick in bankruptcy filings.

The deteriorating financial conditions for farmers and ranchers are a direct result of several years of low farm income, a low return on farm assets, mounting debt, more natural disasters, and the second year of retaliatory tariffs on many U.S. agricultural products.

Currently, Chapter 12 bankruptcies are capped by a $4.1 million debt limit, which Wilton says prevents many family farmers from filing. However, Congress passed legislation to increase the cap.

 The Family Farmer Relief Act updates the Chapter 12 bankruptcy eligibility by raising the debt limit from $4.1 million to $10 million. This allows more farmers the opportunity to qualify under Chapter 12 bankruptcies and gives producers and their creditors a better chance to reorganize and avoid mass liquidation, ultimately preventing further consolidation in the agriculture industry.

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