If you and your family farm, no one need tell you that times are tough for farmers. Low commodity prices, retaliatory tariffs and natural disasters, followed by the worst unemployment rate in decades, have placed many family farmers in untenable financial positions. In addition, the 2019 Family Farmer Relief Act raised the debt ceiling from $4.3 million to $10 million for farmers seeking Chapter 12 relief.
The Fence Post, a nationwide agricultural newspaper, reports that Chapter 12 bankruptcy filings had already gone up by 23% between March 2019 and March 2020 when the pandemic hit. Not surprisingly, these bankruptcy filings concentrated in the Midwest, which, as you know, had already seen several years of low milk and crop prices. In fact, more than half of the Chapter 12 filings occurred in the 13-state Midwest region.
Unemployment represents another major factor in farm bankruptcies. When high unemployment rates combine with low commodity prices, you almost inevitably see reduced farm revenues. When your revenues decrease, this, in turn, makes it more difficult for you to repay the debts that farmers always have. Unfortunately, the unemployment rate in Illinois has hovered over 7% for quite a while now and currently stands at 7.1%.
Admittedly, this is not as dire as the situation during the Great Recession when unemployment surged to almost 10% and off-farm income plummeted by as much as $10,000 per household. Nevertheless, today’s unfavorable farm conditions may well continue to result in an ever-increasing number of Chapter 12 bankruptcy filings. If you are one of them, know that Chapter 12 allows you to propose and implement a plan whereby you repay all or part of your debts over an extended period of time and get back on a sound financial footing.