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Relief urged for family farmers facing bankruptcy

Legislation would ease process of reorganizing debt through Chapter 12 bankruptcy rules.

Restructuring bankruptcy rules to make more farms eligible comes amid a continued downturn in the farm economy was highlighted during a hearing Tuesday on bankruptcy law oversight before the House Judiciary Committee’s subcommittee on antitrust, commercial and administrative.

Rep. Antonio Delgado (D., N.Y.) urged consideration of H.R. 2336, the Family Farmer Relief Act, his legislation that would ease the process of reorganizing debt through Chapter 12 bankruptcy rules.

In his testimony, Delgado noted that farmers are currently facing a fifth year of declining net farm income. Prices are low, inputs are high and current trade policies make the future unknown. He added that 2018 marked the fourth consecutive year of rising bankruptcy rates as a proportion of the farm population.

“Last year, just 498 farms filed for Chapter 12 bankruptcy, compared to nearly 766,000 consumer filings through Chapters 7 and 13. Over the last 10 years, Chapter 7 and Chapter 13 have seen 10 million total filings, compared to just 5,039 Chapter 12 filings. It’s clear the current debt cap has rendered Chapter 12 an inaccessible tool for today’s farm families,” Delgado said.

The legislation modifies Chapter 12 bankruptcy rules to increase the debt cap for eligibility from $3.237 million to $10 million. These changes reflect the increase in land values as well as the growth over time in the average size of U.S. farming operations. “These charges will provide farmers additional options to manage the current farm economy. Lifting the cap will allow farmers to retain assets and continue farm operation,” Delgado added.

The legislation is endorsed by the American Farm Bureau Federation and the National Farmers Union.

Delgado introduced the Family Farmer Relief Act along with 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.). H.R. 2336 is the House's companion bill to legislation 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.).

“A recent report shows that small farms in Wisconsin are closing permanently at a rate of two per day. Among the myriad of challenges these farmers face is difficulty restructuring debt under outdated laws,” Sensenbrenner said. “I’m proud to sponsor this bipartisan, bicameral legislation to modernize our bankruptcy code, which will help Wisconsin family farmers continue operating for years to come.”

“The financial choices that family farmers are faced with right now are gut-wrenching, and given the continued slump in the farm economy, this bill will give those farmers and ranchers additional options when it comes to restructuring their debt and trying to figure out a way to keep operating,” Peterson added.

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