Farm Bankruptcies Rising as Coronavirus Pandemic Drags On
- posted: Jul. 30, 2020
Even before the COVID-19 pandemic hit, American farmers were already struggling with export market disruptions, low commodity prices, weather events and declining farm income. The virus has made a tough situation worse and the agricultural economy is in its weakest position since the Great Recession. The number of farmers filing for Chapter 12 bankruptcy as a result of these conditions is on the rise.
Recently released data from the U.S. courts show a 23 percent increase in Chapter 12 filings for the 12-month period ending March 31, 2020. The 627 filings during this period are the third highest total over the last 20 years.
The American Farm Bureau Federation predicts that the situation could worsen, given that the U.S. courts’ data goes only through the end of March, which is before the impact of coronavirus truly set in. The Farm Bureau says the virus’s impact on farm revenue may make it more difficult for more farmers to repay debt, leading to more bankruptcy filings. Indeed, by the end of June, agricultural loan delinquencies hit an eight-year high, a sign that the market disruption caused by COVID-19 is taking its toll.
The Midwest has had more recent farm bankruptcies than any other region. More than 50 percent of Chapter 12 filings during the 12-month period ending March 31 were in the 13-state Midwest region, which includes South Dakota. The Farm Bureau says farmers and ranchers are currently carrying a record $425 billion in debt. If the U.S. unemployment rate remains at its current levels for very long, off-farm income will be out at significant risk, making it more difficult for farmers and ranchers to service the debt and eventually putting pressure on land values if farmers cannot repay their land loans.
If your farm is struggling, Chapter 12 could be an option. You can file for this relief if at least 50 percent of your annual income is from your farming operation. And thanks to the Family Farmer Relief Act of 2019, more farmers can advantage of Chapter 12.You can now file for relief as long as you have debt of less than $10 million, a three-fold increase from the prior debt limit of $3.2 million.
Filing for Chapter 12 relief allows you to reorganize your debt and keep your farm in operation. I Chapter 12 in fact provides the most lenient treatment of debt out of all the different types of bankruptcy.
Based in Rapid City, Anker Law Group represents farmers throughout South Dakota in Chapter 12 proceedings. We are ready to meet with you, discuss your situation and explain how we can help. Schedule a free consultation with our bankruptcy lawyers by calling 605-519-5967 or contact us online.