CHICAGO (Reuters) - With farm bankruptcies rising and
agricultural debt loads soaring, the U.S. Senate has passed a
bill that will make it easier for more farmers with larger
amounts of debt to file for bankruptcy protection.
The bipartisan bill - called the Family Farmer Relief Act of
2019 - raises the ceiling on how much debt producers who file
for Chapter 12 bankruptcy can have, to $10 million from the
previous $4 million.
Chapter 12 is a part of the federal bankruptcy code that is
designed for family farmers and fishermen to reorganize their
debts. It was created during the 1980s farm crisis as a simple
court procedure to let family farmers keep operating while
working out a plan to repay lenders.
It costs far more now to run a U.S. farm than it did 30 years
ago, according to U.S. Department of Agriculture data. Without
this change to the law, bankruptcy experts say, farmers whose
debts exceed $4.15 million are forced to use Chapter 11
bankruptcy protection, which is more costly and onerous.
The legislation, passed by the Senate on Thursday and earlier by
the U.S. House of Representatives, is headed to the White House
for President Donald Trump to sign, lawmakers said on Friday.
The bill aims to help the farm community avoid "mass
liquidations and further consolidation in the largest sectors of
the industry," said U.S. Senator Chuck Grassley, the Iowa
Republican who introduced the legislation in the Senate in
Bankruptcy lawyers and farm groups have long advocated for this
change. As the U.S.-China trade war drags on, farm incomes have
steadily fallen and shrinking cash flow is pushing some farmers
to retire early and others to declare bankruptcy.
"With what's going on in farmland today - as net income has
continued to decrease, all the market uncertainty and the
natural disasters - this is a very timely change," said American
Farm Bureau Federation President Zippy Duvall.
Not everyone has been in favor of the change. The American
Bankers Association urged lawmakers to oppose the bill and
warned "credit terms would tighten considerably for many family
farms, with a disproportionate impact on the most distressed
farms most in need of credit," according to a letter dated July
25 and sent to House lawmakers.
A Reuters analysis of Federal Deposit Insurance Corporation data
found that - after years of building up their farm lending
portfolios in the wake of the U.S. housing meltdown of the late
2000s - top Wall Street banks are now pulling back from the
sector as farm incomes are falling and farm loan delinquency
rates are rising.
(Reporting by P.J. Huffstutter in Chicago; Editing by Matthew
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