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Farm bankruptcies are rising

Following years of low farm income, farm bankruptcies are on the rise, according to the American Farm Bureau Federation (AFBF).

The nation’s largest farm organization noted delinquency rates are above the historical average and trending in the wrong direction. The number of Chapter 12 bankruptcies is rising significantly.

“Since June 2018, there were a total of 535 Chapter 12 bankruptcy filings,” Allison Wilton, AFBF economic analysis intern, said. “This is an increase of 13%. States in the Midwest—such as Kansas, Minnesota and Wisconsin—had the highest number of filings, and the Midwest overall had a total of 240 filings, the highest in the nation.”

The depressed farm economy, Wilton said, is driving the uptick in bankruptcy filings.

“The deteriorating financial conditions for farmers and ranchers are a direct result of several years of low farm income, a low return on farm assets, mounting debt, more natural disasters and the second year of retaliatory tariffs on many U.S. agricultural products,” she said.

Currently, Chapter 12 bankruptcies are capped by a $4.1 million debt limit, which Wilton said prevents many family farmers from filing. However, Congress passed legislation to increase the cap.

“The Family Farmer Relief Act updates the Chapter 12 bankruptcy eligibility by raising the debt limit from $4.1 million to $10 million,” Wiltons said. “This allows more farmers the opportunity to qualify under Chapter 12 bankruptcies and gives producers and their creditors a better chance to reorganize and avoid mass liquidation, ultimately preventing further consolidation in the agriculture industry.”

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