Farm bankruptcies in Wisconsin

As economic times continue to be uncertain, the impact is being felt by individuals in every walk of life. Farmers in Wisconsin have been battling the economic crunch over the last several years as they continue to distribute milk into a market that has become oversaturated, perhaps to the point of putting the people who supply it out of business. Farmers who are facing bankruptcy need to be informed about the options that they have going forward.

Numbers on the rise for Wisconsin farm bankruptcy cases

According to the American Farm Bureau Federation, Wisconsin currently leads the nation in farm bankruptcies. Since the beginning of 2020, 39 farms in Wisconsin have filed for Chapter 12 bankruptcy protection, an alarming number when compared to the 57 farms that filed bankruptcy in all of 2019. This growing number of farm bankruptcies can largely be attributed to the shutdown of many food services, schools, sporting events and festivals. Those events typically make up 33% of the market for products that come from Wisconsin’s dairy farms.

Smaller Wisconsin farms have faced the most trouble due to the present competition of concentrated animal feeding operations (CAFOs). This intense competition followed by the onset of the coronavirus pandemic made it difficult for farmers to avoid filing for Chapter 11 or Chapter 12 bankruptcy.  

Different options for farmers and their business

Chapter 12 bankruptcy protection allows farms to restructure their finances in an attempt to avoid a court-ordered liquidation. While much of the news coverage of commercial bankruptcies focuses on Chapter 11 bankruptcy protection, that particular type is better for large corporations such as car manufacturers and airline companies. Chapter 12 is considered a more efficient and successful tool for small business that are facing financial hardships.

Farmers facing bankruptcy may want to contact an attorney who is well-versed in the bankruptcy laws in Wisconsin. An attorney may help their client by gathering information about their existing assets and debts and guiding them through the legal process of filing for bankruptcy protection. A bankruptcy attorney might be able to help their client avoid liquidation and continue running their business.

No more dairy dumping in Wisconsin farms

The COVID-19 pandemic led to the closure of schools, restaurants, hotels, and food-service businesses. This turned into a dairy farmer’s nightmare, as the marketplace for dairy products greatly diminished. The new economic atmosphere forced farms to dump gallons of milk. Golden E Dairy had to dump 25,000 gallons of fresh milk per day.

Thankfully, milk dumping in Wisconsin has ceased as the industry has adjusted to demand changes. However, as we emerge out of the pandemic, the uncertainty of the current market still proves to be a challenge to farmers.

How should struggling farmers proceed during a potential bankruptcy?

With supply and demand likely to remain volatile, farmers should talk to an experienced Wisconsin farm bankruptcy lawyer to evaluate whether restructuring is the right path. Filing Chapter 12 bankruptcy provides immediate relief from collection activity (such as foreclosure or repossessions) and is a structured method to reset debt payment terms and retain property that might otherwise be lost through foreclosure or repossession. Every case is unique, but often some debt can be discharged and eliminated, and in Chapter 12 you may even be able to discharge taxes arising from the sale of farm assets (i.e., capital gains taxes).

If your total debt exceeds $10 million, filing Chapter 11 bankruptcy may be the right option for you. Chapter 11 provides similar restructuring and debt relief options as Chapter 12. Every case has its own nuances, which can be explored in more detail during a consultation with experienced bankruptcy counsel. To learn more about the Steinhilber Swanson LLP Chapter 11 and Chapter 12 practice, click here.