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Honored Advisor

Farm debt exceeds chapter 12 limits

They`re talking about raising it to $10 million, that is no longer a "Norman Rockwell painting"  farmer.   I`m against it.

 

 

http://www.iowafarmertoday.com/news/regional/farms-exceed-chapter-bankruptcy-debt/article_763f12a4-2...

 

 

“The debt of family farmers has increased far faster than the rate of inflation,” Peiffer said. “That’s why the debt limit, I believe, is too small. I’ve been advocating to (increase the aggregate debt limit to) $10 million.”

Peiffer said nearly half of his clients who don’t qualify for the current debt limit would still not qualify with a $10 million limit.

Chapter 12 bankruptcy is intended to allow “family farmers” to propose and carry out a plan to repay all or part of their debts.

To qualify for Chapter 12, in addition to being engaged in farming, at least 50 percent of a family farmer’s total fixed debts (excluding debt from the home) must be related to farming, and 50 percent of the gross income for the individual or husband and wife must come from farming.

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7 Replies
Veteran Advisor

Re: Farm debt exceeds chapter 12 limits

The  last  sentence of the   5o %  business  is  very  interesting  -  indEEd  

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Honored Advisor

Re: Farm debt exceeds chapter 12 limits

Think how mirky that gets trying to define what debt is farm and what debt is not for a business operating at that scale...

 

i.e. what is farm--- the owned grain elevator,,, the fertilizer facility that does some custom work,,,,  the seed dealership.... , the shares in a feedlot ,,,, the grain mill selling ground corn to dairy's,  The trucking business moving grain for .................... etc.

 

That wording creates definition issues.   

 

There are probably judges that would deem that amount of sales to be non farming.   

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Veteran Advisor

Re: Farm debt exceeds chapter 12 limits

"Joseph Peiffer, who has practiced bankruptcy law in Cedar Rapids, Iowa, since 1985, said well more than half of the farmers coming into his office during the past two years did not qualify for a Chapter 12 bankruptcy because they had aggregate debts in excess of the current inflation-adjusted limit of $4,153,150."

 

$10 million?  Am against it.  Current limit is high enough, if not too high already.  Nobody is stopping those guys from taking actions to reduce their apparently unmanageable debt levels, and thus perhaps qualifying for Chapter 12 as it stands.  And, somebody apparently took on a lot of risk in providing that much money to those people --  don't care who it is, they deserve some of the pain, that's why they call it 'risk'.

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Honored Advisor

Re: Farm debt exceeds chapter 12 limits

Yeah, when them deadbeats got hundreds of thousands in debt written off in the 80`s, they should`ve received no more than "40 acres and a mule".  But that chapter 12 was a hammer over the head of the lender and could negotiate forgiveness of their debt, they made more in the stroke of a pen than many make in a lifetime...a lot of new 1988 pickups were sold and a lot of farm houses major remodeled or McMansions built in 1988.

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Highlighted
Senior Contributor

Re: Farm debt exceeds chapter 12 limits

Wasn't quite the easy Deere. I hear the tax man sent them a,bill
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Honored Advisor

Re: Farm debt exceeds chapter 12 limits

I don`t know the tax implications, it won`t surprise me if it was stretched out over 5 years to lessen the tax blow.   It could explain why so many 1988 pickups were sold and the spending spree of 4455mfd tractors and 9500 combines, no one that I know that got a write-off, exactly sat quietly on their windfall.  No they are high rollers that beat the system and were gonna dance with the devil that brought `em.

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Advisor

Re: Farm debt exceeds chapter 12 limits

Beware of crossing over to the dark side.