Management Tool of Last Resort: Bankruptcy Offers Protections to Qualifying Agricultural Operations and Fishermen to Restructure Business and Survive Tough Economic Times

Abstract

Agriculture like many businesses is full of risks: marketing, financial, production, labor, and legal risks. With each risk area, producers must develop strategies to manage those risks. To manage marketing risks, for example, a producer would develop a plan for how to handle crops grown over the course of the season to maximize profits. Managing financial risks may require a producer to purchase crop insurance to cover losses if a crop fails. But sometimes in an operation, the risks may outnumber the strategies developed to manage those risks, and the operation may experience significant financial losses.

Bankruptcy is often a risk management tool of last resort for a farming operation. For many family farmers and fishermen, the idea of bankruptcy is enough to lose the benefits from avoiding filing in a reasonable time. Chapter 12 of the U.S. Bankruptcy Code has made business reorganization and debt repayment a much more streamlined process, allowing family farmers and fishermen to reorganize their operation to avoid total business collapse. Chapter 12 is useful for most farmers and fishermen seeking help under U.S. Bankruptcy Code. Chapter 7 and Chapter 13 is useful for debts of a single individual in business with unexpected business difficulties, and Chapter 11 may be used as a last resort when a debtor’s debt exceeds limits from other chapters, or are not qualified for a Chapter 12.