Farm Bankruptcy Numbers Down, Percentages Higher in 2018

(WASHINGTON, DC) Caseload statistics from the United States Courts indicate that in 2018 Chapter 12 family farmer and family fisherman bankruptcies nationwide were down from prior-year levels. Chapter 12 farm bankruptcy provides a flexible and seasonal repayment schedule, and at times may provide lower interest rates and reduce the overall debt burden. Though bankruptcies were down in 2018 compared to prior-year levels, as a proportion of farms in the U.S., bankruptcies were higher. In some portions of the U.S., farm bankruptcies were at decade-high levels – likely reflecting poor commodity prices and cash receipts associated with dairy and row crop production. This situation is likely to worsen says Dr. John Newtow with the American Farm Bureau Federation. Farm debt is record-high, the debt-to-asset ratio has climbed for six consecutive years, and farm debt as a proportion of annual farm income is at 97 percent—a 32-year high. In addition, lending standards are tighter and the cost of credit is rising. There are options before bankruptcy relief, and certainly many farmers have liquidated assets to discharge a debt. How much longer can many others endure remains a question. The capacity to repay debt will be further challenged in 2019 if farm commodity prices do not improve. Continued retaliatory tariffs on U.S. agricultural commodities will only make it harder for farmers to service debt. Finally, he says, while trends are concerning, bankruptcy does not mean the loss of the family farm. Through a successful Chapter 12 bankruptcy, a farmer may have an opportunity to retain assets and continue the farm operation in some capacity.