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November 26, 2018

Chapter 12 Farm Bankruptcies Double in Federal Reserve’s 9th District

Top Story  |   |  By: Jim Dickrell

Chapter 12 bankruptcies have more than doubled in the Federal Reserve 9th District, which encompasses northern tier states stretching from Wisconsin west to Montana.


For the 12 months ending in June 2018, reported Chapter 12 bankruptcies totaled 84 farm operations, more than double the number reported in 2014. Seventy such bankruptcies were reported in 2010, in the depths of the Great Recession.





“However, current prices levels and the trajectory of current trends suggest that this trend has not yet seen a peak,” says Ronald Wirtz, Director of Regional Outreach for the 9th District.


Most of the bankruptcies are dairy farms. Wisconsin is seeing about 60% of the bankruptcies in the 9th District, says Wertz. “Though the state is the country’s number two milk producer, it still has many small farms, which tend to be more exposed to large price fluctuations,” says Wirtz.





The number of licensed dairy farms in Wisconsin has dropped by about 1,200 since 2016, a 13% decline, with 584 leaving the business this year alone.


Those farms opting for Chapter 12 bankruptcy protection are farms that are trying to pay down debt but remain in business. “[Chapter 12] uses facets of both Chapter 11 and Chapter 13 bankruptcy—or more accurately eliminates certain barriers that farmers would face if they sought protection from creditors under either of those chapters in the bankruptcy code,” says Wirtz.





“Chapter 12 combines the comparative simplicity of Chapter 13 with the higher debt levels allowed in Chapter 11. It also provide for payment flexibility, given the seasonal nature of farm output,” he says.


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