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Bill Raising Debt Ceiling for Family Farm Bankruptcies Heads to White House
With farm bankruptcies rising and agricultural debt loads soaring, the U.S. Senate on Thursday passed a bill that will make it easier for more farmers with larger amounts of debt to file for bankruptcy protection, Reuters reported. The bipartisan bill — H.R. 2336, 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. 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 protection, which is more costly and onerous. ABI testified in support of the bill. 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. Read more.
In addition to the Family Farmer Relief Act, the Senate on Thursday also passed H.R. 3311, the Small Business Reorganization Act; H.R. 2938, the Honoring American Veterans in Extreme Need Act (HAVEN Act); and H.R. 3304, the National Guard and Reservist Debt Relief Extension Act. ABI testified in support of H.R. 2938, H.R. 3311 and H.R. 2336. All the bills passed the U.S. House of Representatives and are non-controversial. The bills received unanimous consent to proceed to passage. The legislation will now be sent to President Trump to be signed into law. Click here to read ABI’s press release.
Bill Would Let Cash-Strapped Injured Veterans Keep Disability Money During Bankruptcy
Congress passed a bill that would extend a lifeline to financially struggling injured veterans, enabling them to spend disability payments instead of using them to pay down debt in bankruptcy protection, WSJ Pro Bankruptcy reported. The Senate yesterday passed four bankruptcy bills that included the Honoring American Veterans in Extreme Need Act (HAVEN Act) that consumer advocates say fixes a mistake written into a 2005 overhaul of the country’s bankruptcy rules. The House passed the bill last week. It now goes to the White House for President Trump’s signature where he is expected to sign the bill. The newly passed bill excludes disability payments from the Department of Veterans Affairs and Department of Defense to veterans or their dependent survivors from the classification of disposable income. The bill would provide relief for military veterans, who face higher rates of homelessness, mental-health problems and unaffordable debt, including from medical expenses for combat-related injuries. A 2017 study from Stanford University found that veterans make up a larger portion of people who have filed for bankruptcy protection. Read more.
The Senate yesterday also passed H.R. 3311, the Small Business Reorganization Act; H.R. 2336, the Family Farmer Relief Act; and H.R. 3304, the National Guard and Reservist Debt Relief Extension Act. ABI testified in support of the HAVEN Act (H.R. 2938), H.R. 3311 and H.R. 2336. All the bills passed the U.S. House of Representatives last week and are non-controversial. The bills received unanimous consent to proceed to passage. The legislation will now be sent to President Trump to be signed into law. Click here to read ABI’s press release.
Trump’s $16 Billion Farm Bailout Will Make Rich Farmers Richer, Report Says
The Trump administration last week revealed details of a $16 billion aid package for farmers hit in the U.S.-China trade war, with key provisions meant to avoid large corporations scooping up big payouts at the expense of small farmers. According to a report released yesterday by the nonprofit Environmental Working Group (EWG), most of the $8.4 billion given out so far in last year’s farm bailout went to wealthy farmers, exacerbating the economic disparity with smaller farmers, the Washington Post reported. An EWG analysis found that the top one-tenth of recipients received 54 percent of all payments. Eighty-two farmers have so far received more than $500,000 in trade relief. The top 1 percent of recipients of trade relief received, on average, $183,331. The bottom 80 percent received, on average, less than $5,000, EWG said. The Agriculture Department said that the program is designed to provide a level of support that’s proportionate to a farm’s size and success. Read more.
The Family Farmer Relief Act (H.R. 2336), which would raise the debt limit for chapter 12 filings from $4.3 million to $10 million, passed the House of Representatives last week along with the Small Business Reorganization Act (H.R. 3311), the Honoring American Veterans in Extreme Need Act (H.R. 2938; HAVEN Act) and the National Guard and Reservist Debt Relief Extension Act (H.R. 3304). All the bills are non-controversial and ABI testified in support of H.R. 3311, H.R. 2336 and H.R. 2938.
The bills need unanimous consent to proceed to passage. According to Senate sources, Sen. Dick Durbin (D-Ill.) has a legislative hold on all bills at this time. The Senate is due to recess at the end of this week until September.
Ohio Farmers Face Lean Year, Hard Decisions After Spring Floods
American farmers are reeling after unrelenting rain delayed planting across the Midwest while trade battles continue to drag down exports and crop prices. Now, the prospect of another lean year is spreading farmers’ pain to the agricultural suppliers, traders and food makers that depend on them, the Wall Street Journal reported. Wood County, south of Toledo in Ohio’s northwestern corner, is usually among the state’s biggest crop-producing areas. This summer, it is among the Farm Belt’s hardest hit. About 131,000 acres lay unplanted this month, nearly half the county’s total, according to estimates from the county’s Farm Service Agency. Only one in five cornfields has a crop growing. Cooperatives, unable to sell seed, fertilizer and chemicals, are cutting employees’ hours. Cattlemen and dairies face feed shortages. Banks are negotiating lower payments on farm loans. And some farmers, already struggling after years of low crop prices, will have to make it until autumn of next year before they produce a crop. Read more. (Subscription required.)
The U.S. House of Representatives on July 25 passed the Family Farmer Relief Act of 2019 (H.R. 2336) to raise the debt limit for chapter 12 filings from $4.3 million to $10 million. Read more.
House Approves Family Farmer Relief Act of 2019 (H.R. 2336)
The U.S. House of Representatives yesterday passed the Family Farmer Relief Act of 2019 (H.R. 2336). ABI testified in June in support of the bipartisan and bicameral bill, and it is also supported by the American College of Bankruptcy, the American Farm Bureau and the American Farmers Union. Rep. Antonio Delgado (D-N.Y.) introduced the bill on April 18, 2019. The current debt limit for chapter 12 filings is $4.3 million. H.R. 2336 would raise this limit to $10 million. Farm size has increased substantially since 1986; meanwhile, net farm income has declined since 2013. “For more than 30 years, chapter 12 has provided a durable tool to deal with the cyclical economic challenges faced in American agriculture, roiled by fluctuating land values, swings in commodity prices, weather calamities and adverse trade policies made by government,” said ABI Executive Director Samuel J. Gerdano. “Chapter 12 has not only assisted family farmers in their efforts to successfully reorganize debts in bankruptcy court, it has perhaps more significantly provided a framework that encouraged stakeholders to reach agreement on debt restructuring outside the expense of the formal bankruptcy process.” In a letter to the House Judiciary Committee, the American Bankers Association (ABA) had urged that Congress proceed with caution on approving the increase, emphasizing the importance of having ready capital available to farmers at low interest rates. The ABA also cited the 2018 Farm Bill as having greatly strengthened the farm economy since its passage. A bipartisan companion bill is pending in the Senate.
U.S. to Pay Farmers Up to $16 Billion for Trade War Losses, South to Benefit
The U.S. government will pay American farmers hurt by the trade war with China between $15 and $150 per acre in an aid package totaling $16 billion, with farmers in the South poised to see higher rates than in the Midwest, Reuters reported. The assistance, starting in mid-to-late August, follows President Donald Trump’s $12 billion package last year that was aimed at making up for lower farm good prices and lost sales. U.S. farmers have been among the hardest hit in the year-long trade war between the world’s two largest economies. Shipments of soybeans, the most valuable U.S. farm export, to top buyer China sank to a 16-year low in 2018. Democrats criticized the move, saying farmers needed fair trade instead of a bailout. Agriculture Secretary Sonny Perdue argued that U.S. farmers were disproportionately hurt by the trade dispute and that the new round of aid was justified. In the new aid package, the U.S. Department of Agriculture said it would pay farmers according to geographic location rather than by crop — a change from last year. Farmers in the cotton-growing Mississippi Delta states stand to be the greatest beneficiaries of the program. The average county payment rate is about $95 per acre in Alabama, $87 in Mississippi and $70 in Louisiana. Payment rates were lower in the Midwest, with a $69-per-acre county average in Illinois, the country’s top soybean producer, and a $66 average in Iowa, the top corn- and hog-producing state. The program covers 29 commodity crops, including soybeans, corn, wheat, sorghum and upland cotton. It also covers dairy and hog farmers, as well as farms that grow 10 specialty crops — including almonds, pistachios, walnuts, cranberries and fresh sweet cherries.
House Approves Family Farmer Relief Act of 2019 (H.R. 2336)
Alexandria, Va. — The U.S. House of Representatives today passed the Family Farmer Relief Act of 2019 (H.R. 2336). ABI testified in June in support of the bipartisan and bicameral bill, and it is also supported by the American College of Bankruptcy, the American Farm Bureau and the American Farmers Union. Rep. Antonio Delgado (D-N.Y.) introduced the bill on April 18, 2019.
Chapter 12 — the chapter under the U.S. Bankruptcy Code that provides reorganization relief to family farmers and fishermen — was added to the Bankruptcy Code in 1986 to more properly handle this specialized area of bankruptcy law. The current debt limit for chapter 12 filings is $4.3 million. H.R. 2336 would raise this limit to $10 million.
Farm size has increased substantially since 1986; meanwhile, net farm income has declined since 2013.
“For more than 30 years, chapter 12 has provided a durable tool to deal with the cyclical economic challenges faced in American agriculture, roiled by fluctuating land values, swings in commodity prices, weather calamities and adverse trade policies made by government,” said ABI Executive Director Samuel J. Gerdano. “Chapter 12 has not only assisted family farmers in their efforts to successfully reorganize debts in bankruptcy court, it has perhaps more significantly provided a framework that encouraged stakeholders to reach agreement on debt restructuring outside the expense of the formal bankruptcy process.”
In a letter to the House Judiciary Committee, the American Bankers Association (ABA) had urged that Congress proceed with caution on approving the increase, emphasizing the importance of having ready capital available to farmers at low interest rates. The ABA also cited the 2018 Farm Bill as having greatly strengthened the farm economy since its passage.
A bipartisan companion bill is pending in the Senate.
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ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes nearly 11,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abi.org/education-events.
Liquidation Value Required in a Chapter 12 Cramdown
Idaho judge seems to disagree with the Second Circuit’s ruling that a chapter 12 debtor can surrender less than all of the collateral to confirm a plan.
Judge Name - Do not use it.
Joseph M. Meier