In the fall of 2019, Congress passed the Family Farmer Relief Act of 2019, which increased the debt limit for Chapter 12 bankruptcy. This law financially benefits family farmers in Nebraska. The amount of debt a family farmer may have to qualify for a Chapter 12 bankruptcy almost doubled to $10,000,000.
Expanding Chapter 12 bankruptcy eligibility means that more family farmers are likely to look to Chapter 12 bankruptcy as a viable solution. For the Nebraska family farmer debating a Chapter 12 bankruptcy, here are some factors to consider:
- You can’t find a lender for the 2020 season, but you might be able to operate on current or incoming cash from sale of grain, cattle, machinery, equipment, or insurance checks.
- Your bank is unwilling to refinance your debt and you have little to no equity.
- You want to let go of low performing land leases that lose you money.
- You intend to sell land, machinery, or equipment and anticipate a large capital gains tax bill from the IRS.
- You attempted mediation, but it went nowhere.
- You co-signed, guaranteed or pledged assets as collateral on a family member’s farm debt and that family member has defaulted or filed bankruptcy.
And know that you are not alone! In 2019, there were 40 Chapter 12 bankruptcy cases filed in Nebraska. This is the highest number of Chapter 12 bankruptcy filings since the 55 filed in 2003. Chapter 12 bankruptcy cases have steadily been on the rise with 8 filed in 2015, 12 in 2016, 20 in 2017, and 27 in 2018. The new bankruptcy law may result in a record number of Chapter 12 bankruptcy filings in Nebraska during 2020.
Deciding whether to file a bankruptcy is a complex and emotional decision. Finding the right attorney to work with you is crucial. Instead of worrying what will come next, meet with a bankruptcy attorney to discover your options for your financial situation.
If you are someone you know is bracing for or already experiencing financial distress, the bankruptcy attorneys at Koenig|Dunne are here to help.