Projections for the third-lowest net farm income in the last decade, record nominal agricultural debt, rising debt-to-asset ratios and interest rates, and continued headwinds for agricultural commodity prices had many anticipating an increase in farm bankruptcies in 2018. However, that is not currently the case.
Caseload statistics from the United States Courts indicate that for the 2018 fiscal year, which ended Sept. 30, there were 468 Chapter 12 bankruptcy filings, down 8 percent, or 40 filings, from the prior year. Filings in fiscal year 2018 were down from prior-year levels but were approximately 25 percent higher than in 2014.
Chapter 12 bankruptcies are designed for family farmers or family fishermen with “regular annual income” and provide a framework for financially distressed farmers to repay debt over a three- to five-year period. Importantly, Chapter 12 bankruptcies allow for seasonal payments to account for harvest and marketing schedules for farmers and ranchers.