Chapter 12 or restructures may save a life

Chapter 12 Bankruptcy or Farm restructures may save a life.


As I write this article it goes without saying that the farm economy is experiencing some tough times.  Many farmers have had to make some tough decisions this year.  I have read that help lines for farmers have been worked overtime with farmers calling in due to financial strain.  It has been said that help lines have been used more than even in the 1980’s. 

I have also read that depression and mental strain have greatly increased over the past year among farmers to the point that suicides among farmers have increased and are outpacing what transpired in the 1980’s.  It is sad that there are those among us that believe the end has arrived and there are no viable options. 

As farmers, we face a large amount of uncertainties.  We have unpredictable weather, prices, pests, and everything else.  Not to mention a year like this year when we have government policies that can wreck havoc on our lives.  In short, there is no limit to the amount of uncertainty and risk that we take on each year as farmers. 

Just when things may feel the bleakest, it is important to remember there are options available for farmers who are facing financial difficulty.  One option is to seek a work out with lenders.  Having open and honest conversations with a lender often can  lead to a positive outcome.  With a work out the farmer puts forth a plan that is approved by the lender.  Sure, some assets may have to be sold under the work out plan, but if the farm operation can continue, then the goal is met.


John wants to make sure farmers understand all their legal financial options and thus
avoid being subjected to undue amount of stress and strain. 
In addition, farmers have the option to file a chapter 12 bankruptcy.  In 2017 there were 501 chapter 12 bankruptcies in the US.  As of July 2018, the number of chapter 12 bankruptcies is down slightly.  However, with the further erosion in grain prices we have seen, it will not be surprising if bankruptcies increase.   Over the past year, farm operations in all shapes, sizes, and commodities found themselves taking advantage of bankruptcy protection.  In fact, some very large and well known operations had to seek bankruptcy protection. 

It is important to remember that bankruptcy should not be viewed as an ending.  In many cases, bankruptcy allows a farm to be afforded a second chance.  One advantage is that a farming operation can be what is called a debtor-in-possession and maintain control of assets when faced with creditors threatening to foreclose or bring other legal action.  This is important because a farm can continue operation while at the same time seeking to restructure. 

There will be many farms this year that will be under financial strain.  There is value in having options that avoid depression and mental strain.  Most importantly, there is a tremendous value in having options that avoids a farmer taking his or her life.  Bankruptcy is one such option.  Having a viable way forward via a bankruptcy can avoid mental strain, depression, and loss of life. 

In the end, farmers need to keep all options on the table and know that remedies exist that can ensure a positive outcome for their.  At the very least, it never hurts to explore the various options and have a full understanding of what options exist.  I cannot stress enough that in most circumstances, there are options that exist and can avoid mental strain and loss of life.  

Comments

Post a Comment

Popular posts from this blog

Estate Planning, Medicaid Preparation, or Both?

Image
 In our last article the discussion centered around the importance of planning in advance for the possibility of needing Medicaid in the future.   Essentially the idea being to plan for the worst, and hope for the best.   This type of forethought is imperative given that Medicaid requires planning to occur at least five years in advance of needing assistance with paying for the costs of home assisted living or long-term nursing care. The Medicaid Estate Recovery Program allows the government to place a lien on any real estate owned by the Medicaid recipient after death. If you are 55 years and older, and receive Medicaid coverage, your assets are subject to a Medicaid lien without the proper planning.    Depending on the level of care needed, according to recent Genworth figures, the average cost of assisted living is $4,500 per month, and the average monthly cost of skilled nursing is $8,910. Failing to plan for how to pay for these costs can result in the loss of a family farm, or
Read more

Medicaid-Why you and your farm should care.

Image
Medicaid – What is it and why should you (and your farm) should care? Our law firm frequently gets calls from clients wanting to inquire about making a Last Will and Testament or appointing someone as Power of Attorney.   This is quite often prompted by the death of a loved one, the diagnosis of an unexpected illness, or being told of a negative estate experience by a friend or neighbor.   Estate planning at any stage of life is something we would always encourage, but there is an aspect of planning that we often times find overlooked and that is planning in advance for Medicaid. There is much confusion about not only the difference between Medicare and Medicaid, but how and what each program covers specifically.   For the purposes of this article, we will be focusing the discussion on long term care needs such as the expense of a nursing home.   For that discussion, the only important thing to note about Medicare, including Medicare supplement insurance, is that it will not cov
Read more

Traditional Method of Farm Succession Planning Broken…. Here is How to Fix it. Part V-Land Division to Heirs.

Image
      (Note: This is part 5 of a 5-part series regarding the authors’ view that farm estate planning in this country is broken and needs fixed, especially in light of “Farm Estate Armageddon” that will happen this decade when ¼ of all farmers retire and 2/3 of all farmers will be over the age of 65.   Past articles can be viewed at www.farmlegacy.blogspot.com .               The year was 2007.   I was 2 years into practicing law and once a month my dad and I would meet with fellow farmers at a neighboring farm to discuss grain marketing.   A grain marketer, Steve, would facilitate the meetings.   For as long as I live, I will never forget a particular meeting when Steve showed up and passed out a packet of information that centered on the coming ethanol boom and how it would change things.   Steve looked at us and said “Boys, be glad you bought ground when you did”.   Steve also told us that we would all be raising just corn in the future as the ethanol demand would push corn con
Read more