By MICHELE F. MIHALJEVICH

Indiana Correspondent

WASHINGTON, D.C. — Legislation that will raise the Chapter 12 operating debt cap to $10 million has been passed by Congress and was awaiting President Trump’s signature at press time.

The Family Farmer Relief Act of 2019 was approved by the U.S. House in late July and by the Senate on August 1. The bipartisan measure increases the debt limit from the current level of $4.15 million.

Chapter 12 is a bankruptcy option only available to family farmers and fishers. It was established in 1986. The Ohio Farm Bureau Federation supports the legislation, said Jack Irvin, senior director of state and national policy for the organization.

“Hopefully there’s not much of a need for it,” he noted. “We don’t want to see any of our farmers going through Chapter 12 bankruptcy. Times have changed, things have become more expensive; with the $4 million cap, some farmers couldn’t use it.”

Over the last 10 years, about 80 Ohio farmers have filed for Chapter 12 bankruptcy, Irvin said. “This is certainly a tool of last resort. The vast majority of farmers I work with are not looking to use this tool.”

Farmers in Ohio and other states have concerns regarding their current crops and markets, he pointed out. “It’s been a perfect storm of tight commodity markets, weather issues and trade uncertainty. There’s a lot of financial stress for our farmers. It’s not going to be an easy fix.”

The bill will help more family farmers avoid liquidation or foreclosure, said Roger Johnson, National Farmers Union president.

“Farm debt is at a record high and too many operations have been pushed to the brink financially,” he explained. “The (legislation) will help more family farmers access Chapter 12 relief, giving them a fighting chance to stay in business.”

The Senate’s passage of the measure “sends an important signal to family farmers and ranchers that our elected officials are willing to act in these challenging times,” said Zippy Duvall, American Farm Bureau Federation (AFBF) president. “The bill gives more farmers an opportunity to qualify for financial restructuring so they can keep their land and livelihoods.”

In a July letter to leaders of the House Judiciary Committee, the American Bankers Assoc. stated bankers are concerned the large increase in the debt limit will be detrimental to the costs of credit for farmers in the long run. The current debt limit already covers most farmers and there is no need for an increase to $10 million, wrote James Ballentine, executive vice president for Congressional relations and political affairs for the group.

Raising the debt limit “in one fell swoop will make the cost of borrowing higher for farmers and reduce the availability of credit,” he noted. “In particular, to offset the additional risk imposed on creditors, interest rates for farm borrowers are likely to rise and much higher costs will be borne by financially weaker farm borrowers, either in the form of increased interest or in their inability to obtain loans at any price.

“(If the bill becomes law), credit terms would tighten considerably for many family farms, with a disproportionate impact on the most distressed farms most in need of credit.”

Chapter 12 bankruptcy filings nationwide dropped from 501 in 2017 to 498 last year, according to an AFBF study of court records. Filings were up slightly in Illinois and Indiana in 2018 and down in Iowa, Kentucky, Michigan, Ohio, and Tennessee.

Overall, 19 states saw an increased number of Chapter 12 bankruptcy filings in 2018 over 2017. AFBF has estimated the bankruptcy rate per 10,000 farmers climbed slightly in 2018.