For Indiana farmers who are negatively impacted by the struggling economy, the term "bankruptcy" might not be viewed as an alternative for them. Most people classify bankruptcy as a step to get out of personal debt through a Chapter 7 liquidation or a Chapter 13 payment plan. Even businesses will use Chapter 11 to reorganize. Farmers are often reluctant to use these chapters. It is important to remember that there is another option for farmers - Chapter 12 - and given the current problems experienced by farmers in the U.S., congress is considering a reform of Chapter 12 to benefit farmers. This can be important to get back on stronger financial ground and save a farm.
With the proposed changes, Chapter 12 would increase the debt limits that those filing can use. Currently, it is around $4.1 million. The new law would raise it to $10 million. The initial proposal did not pass, however there is a plan to reintroduce it. Family farmers have been having struggles in recent years and there was an accompanying rise in the number of Chapter 12 bankruptcies. With the debt limit on Chapter 12, this has prevented those with larger farms to file and has thereby increased the danger of losing their farms.
Research has shown that in 19 states, there was a 19 percent increase in Chapter 12 filings in the past three years. It has been especially problematic in the Midwest. In 2018, 498 filed for Chapter 12. That is a 25 percent increase from 2014. It is not just larger farms that are feeling the effect of the struggling economy. Even so-called "mom and pop" farms find they have a debt that goes beyond the current limits. There have been periodic increases to coincide with inflation since 2005, but that has not been enough to help many farmers.
While this potential new law bears watching, farmers who need immediate relief should understand that there are options even if it is through Chapter 7, Chapter 11 or Chapter 13. When confronted with financial problems for any reason, a farmer should consider consulting with a bankruptcy attorney to discuss the possibilities. A law firm that has experience in helping people with debt relief no matter their vocation and circumstances should be contacted as soon as possible.