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Bankruptcy Law Gavel Legal

Farmer bankruptcy bill signed into law

Changes to Chapter 12 bankruptcy code increase debt limit from $3 million to $10 million.

A bill to aid family farmers during downturns in the agricultural economy was signed into law by President Donald Trump. H.R. 2336, the Family Farmer Relief Act, eases the process of reorganizing debt through Chapter 12 bankruptcy rules and was created specifically to help family farmers during tough economic times.

The bill addresses an outdated debt cap that limits eligibility for Chapter 12 bankruptcy relief and has essentially rendered the tool inaccessible to farmers today. The bill expands the debt that can be covered under Chapter 12 from $3.237 million to $10 million. The changes reflect the increase in land values as well as the growth over time in the average size of U.S. farming operations and are meant to provide farmers with additional options to keep their doors open during downturns in the farm economy.

Reps. Antonio Delgado (D., N.Y.) introduced the legislation in April, with support from House Judiciary Committee ranking member Jim Sensenbrenner (R., Wis.), House Agriculture Committee chairman Collin Peterson (D., Minn.) and Reps. TJ Cox (D., Cal.), Kelly Armstrong (R., N.D.) and Dusty Johnson (R., S.D.). This legislation passed the House on July 26, passed the Senate on Aug. 2 and was signed into law on Aug. 23, 2019.

“Today is a victory for our small and midsize farmers, who now have the flexibility to reorganize their debt and continue operations in what continues to be a challenging time for agriculture,” Delgado said. "In this era of bitter partisanship, I was proud to lead my colleagues on both sides of the aisle to pass a bipartisan, commonsense bill to help small farmers in New York’s 19th congressional district during this down farm economy. I thank my bipartisan, bicameral partners for their work to move this legislation through the House and Senate and to bring this urgent relief to our farmers.”

The Senate companion bill to the Family Farmer Relief Act was introduced by Sens. Chuck Grassley (R., Iowa), Amy Klobuchar (D., Minn.), Ron Johnson (R., Wis.), Patrick Leahy (D., Vt.), Thom Tillis (R., N.C.), Doug Jones (D., Ala.), Joni Ernst (R., Iowa) and Tina Smith (D., Minn.).

The legislation is endorsed by the American Farm Bureau, National Farmers Union, National Corn Growers Assn., National Milk Producers Federation, National Pork Producers Council and American Bankruptcy Institute.

American Farm Bureau Federation president Zippy Duvall said the bureau "is appreciative that the Family Farmer Relief Act of 2019 is now law. This law relieves some of the uncertainty farmers are facing due to export market disruptions, weather events and declining farm income. It will help family farmers reorganize after falling on hard times by increasing the debt limit for relief eligibility under the Chapter 12 bankruptcy code. 

“While this is a sobering reflection of the current state of the agricultural economy, we are grateful to Congress, the President and his Administration for their prioritization of reforming our current bankruptcy laws,” Duvall added.

“Farmers are facing a perfect storm of challenges, be it uncertainty surrounding trade and tariffs or disruptions in the ethanol market. Amid these challenges they need access to all available tools which the Family Farmer Relief Act of 2019 will ensure they have. This benefits not just the farmer, but their rural communities. This bill raises the Chapter 12 operating debt cap to $10 million, giving more farmers facing difficult financial decisions the opportunity to survive another day,” National Corn Growers Assn. president Lynn Chrisp said.

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