Changing Bankruptcy Code For Farmers Could Decrease Credit

(WASHINGTON, DC) A proposed change to the Bankruptcy Code could have adverse effects for the nation’s agricultural producers, the American Bankers Association (ABA) said in a statement for the record in a House Judiciary Subcommittee. ABA submitted the testimony as lawmakers consider H.R. 2336, which would raise the current debt limit for Chapter 12 filings from approximately $4.3 million to $10 million. Designed to help farmers keep their farms but reorganize their debts to avoid foreclosure or liquidation, Chapter 12 bankruptcy includes expansive rights for debtors that do not exist in other chapters of the bankruptcy code. ABA argues that raising the Chapter 12 debt limit could increase the cost of borrowing for farmers and ranchers and reduce the overall availability of credit. Under current Chapter 12 rules, debt limits are already indexed to inflation and are adjusted accordingly every three years. Rather than make a significant one-time increase as the bill proposes, ABA suggests that the three-year adjustment could be made annually to more quickly address changing situations.