The Three Seasons of Farming: Planting, Harvesting and Bankruptcy?

Wisconsin has a long and rich tradition as an agricultural state. But, farming has proven to be a cyclical way to make a living, and there is no doubt that farmers today are experiencing a tough part of that cycle in Wisconsin.

Experts point to a number of factors driving Wisconsin farm bankruptcies, including “overproduction, commodity prices and a global pandemic”. These factors have come together to “form the perfect storm for farmers.” Unfortunately, this is a trend that began before the pandemic. The Western District of Wisconsin led the nation in farm bankruptcies in 2017, 2018 and 2019. The latest information available shows that Wisconsin continues to lead the nation in farm-related bankruptcies.

Options for Struggling Farmers

Despite the difficulties farmers face, a bankruptcy does not necessarily mean the end of the farm – in fact, Chapter 12 bankruptcy can give farmers the tools they need to restructure their finances, improve their cash flow, and emerge with a stronger and more viable farming operation than they had before filing for bankruptcy.

Chapter 12 bankruptcy is exclusively available to family farmers and fisherman. Chapter 12 allows a farmer to file for bankruptcy and propose a plan for reorganizing their debt over a period of three to five years.

A major benefit of Chapter 12 is the ability of farmers to reduce their mortgage to the current value of the property, reduce their interest rate to the current market rate, and/or extend the payment period on their mortgage. This can provide valuable breathing room to a farmer who needs to restructure their financial picture and farm operations. Another major advantage to Chapter 12 is the ability to treat capital gains taxes arising from the sale of farm assets more favorably than those taxes would be treated outside of bankruptcy.

Our attorneys at Steinhilber Swanson LLP have extensive experience with all facets of bankruptcy, including Chapter 12. We can help you explore your options, answer your questions, and guide you as you work to protect your family farm.