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Why Do Farmers Have A Special Bankruptcy?

Why Do Farmers Have A Special Bankruptcy?

Bankruptcy is a complicated and difficult situation to navigate on your own because there are so many rules and regulations that must be followed.  Knowing exactly what to do is easier said than done for most and can seem impossible for others.  When it comes to the different bankruptcy chapters (7, 11, 12, or 13), how do you know which kind of bankruptcy would apply to your situation? 

Getting the help of a bankruptcy attorney can make this complex question easier to figure out.  Our law firm will make sure that you have a lawyer who will work diligently to make your bankruptcy proceedings as smooth as possible and we can let you know the best bankruptcy to fit your situation.  

Lancaster PA is home to over five thousand farms and we want farmers to know, we’re on your side too.  If you are a farmer, or fisherman, who is facing bankruptcy, you should hear what we have to say first. 

It is a little-known fact, but there is a type of bankruptcy that was designed specifically for farmers.  In the years leading up to the 1980’s, the agriculture industry was facing some tough times.  Economic growth was becoming stagnant and farmers were being hit hard.  Many farmers had to price the goods they were selling so low that they weren’t making much money.  This reduced income then caused a large portion of the farmer population to take loans and open lines of credit in order to continue day to day operations.  By the end of 1983, the total recorded debt of farmers nationwide had grown to nearly $216 billion.

Unfortunately, farmers continued to struggle to make ends meet.  At this point in time, there weren’t any specific programs to help farmers who were struggling financially.  Farmers could file for Chapter 11 bankruptcy, but more often than not this was very costly and mainly being used by large corporations.  They did have the option to file for Chapter 13 bankruptcy, but this was used mostly when debts were relatively small, which was seldom the case with farmers. 

Then in 1986, Chapter 12 bankruptcy was introduced specifically to help farmers and fishermen find relief from their mounting debts.  It was initially enacted as a temporary measure set to expire in 1993, but it was extended and made permanent in 2005.

Individual farmers, as well as corporate owned farms, are able to file for Chapter 12 bankruptcy.  The procedure of how Chapter 12 begins with filing a petition.  Like other bankruptcy chapters, the filing of a bankruptcy creates an automatic stay that prohibits creditors from taking further actions against the farmer unless otherwise approved by the Bankruptcy Court. Additionally, a Chapter 12 is similar to a Chapter 13 and Chapter 11 bankruptcy because it involves the creation of a repayment play that is proposed by the farmer, allowing the farmer to extend the time period to payback some of his or her debts. The farm’s business assets are valued and may be used as part of the plan to repay outstanding debt.    These are just some of the details about the process for Chapter 12 bankruptcy.  

With the assistance of an experienced lawyer, a farmer can file for Chapter 12 bankruptcy and start on the path to debt relief.  Nikolaus & Hohenadel can pair a client with a qualified attorney who can aid a farmer and help them understand the process behind filing for Chapter 12 bankruptcy.  Our law firm is committed to the farmers of Lancaster, PA, and want to give each of them the help they need. 

Contact us today to set up an appointment to speak about your options.