Understanding a Potential Congressional Reform of Chapter 12 Bankruptcy in Luverne, MN

Across the Midwest, family-owned farms are still struggling to make ends meet after a difficult start to the growing season. Farmers and fishers in the region are facing large debts without an income to match the required monthly payments. Because of these financial difficulties, more and more families are filing for bankruptcy or seeking other forms of debt relief. If you’re a family farmer or fisher and have been unable to make payments on your debts, bankruptcy might be the right path to take. With the help of Behm Law Group Ltd., you can file a successful case for Chapter 12 bankruptcy in Luverne, MN, and find your way out of debt without sacrificing your family business.

In the 1980s, the U.S. government devised a bankruptcy chapter specifically suited to treat the debts of family farmers and fishers. This chapter was based on the bankruptcy laws set up for fishers and farmers in debt during the Great Depression. Today, Chapter 12 works to reorganize debts into a repayment plan tailored to debtors’ income and expenses. This process is similar to Chapter 13, but it’s specific to the debts and expenses of family farmers and fishers.


For many purposes, current Chapter 12 laws have worked well to protect family farms and fishing operations while ensuring fairness to their creditors. However, in the face of current farm debts, Congress has introduced a potential reformation of Chapter 12 bankruptcy.


Why the change?

Farm debts have been around since farms have existed, but farms themselves have changed even since the 1980s when Chapter 12 standards used today were established. The average size of family farms and fishing operations have increased dramatically in the past 40 years, and the debt amounts have increased accordingly. However, the amount of debt allowed to file for Chapter 12 bankruptcy instead of liquidation bankruptcy has not increased alongside farm sizes and debt amounts. To continue protecting farms from liquidation, some aspects of Chapter 12 need to change.


What might change?

Primarily, Congress is proposing increased debt limits for those looking to file for Chapter 12. Family farmers and fishers are currently allowed up to $4.153 million in debt to qualify for Chapter 12, but average debts today are more than double that. Increased costs for property, equipment, supplies, facilities, and fuel all lend themselves to higher debts for farms with lower income overall. To allow more farms to reform with the structure of a Chapter 12 repayment plan, the debt limits need to be raised.


With several members of Congress supporting plans for Chapter 12 reform, more family farmers and fishers may be given a chance to repay debts and stay in business for the long term. If you think filing for Chapter 12 bankruptcy in Luverne, MN, or the surrounding area might be the right choice for your farm, contact Behm Law Group Ltd. at (507) 387-7200 today.