According to the American Farm Bureau Federation, Wisconsin currently leads the nation in farm bankruptcies. Western Wisconsin has been hit particularly hard, with 39 new Chapter 12 bankruptcies in 2020.
Smaller Wisconsin farms have faced the most trouble due to the present competition of concentrated animal feeding operations (CAFOs). This intense competition followed by the onset of the coronavirus pandemic made it difficult for farmers to avoid filing for Chapter 11 or Chapter 12 bankruptcy.
No More Dumping
The COVID-19 pandemic led to the closure of schools, restaurants, hotels, and food-service businesses. This turned into a dairy farmer’s nightmare, as the marketplace for dairy products greatly diminished. The new economic atmosphere forced farms to dump gallons of milk. Golden E Dairy had to dump 25,000 gallons of fresh milk per day.
Thankfully, milk dumping in Wisconsin has ceased as the industry has adjusted to demand changes. However, as we emerge out of the pandemic, the uncertainty of the current market still proves to be a challenge to farmers.
How Should Struggling Farmers Proceed?
With supply and demand likely to remain volatile, farmers should talk to an experienced lawyer to evaluate whether restructuring is the right path. Filing Chapter 12 bankruptcy provides immediate relief from collection activity (such as foreclosure or repossessions) and is a structured method to reset debt payment terms and retain property that might otherwise be lost through foreclosure or repossession. Every case is unique, but often some debt can be discharged and eliminated, and in Chapter 12 you may even be able to discharge taxes arising from the sale of farm assets (i.e., capital gains taxes).
If your total debt exceeds $10 million, filing Chapter 11 bankruptcy may be the right option for you. Chapter 11 provides similar restructuring and debt relief options as Chapter 12. Every case has its own nuances, which can be explored in more detail during a consultation with experienced bankruptcy counsel. To learn more about the Steinhilber Swanson LLP Chapter 11 and Chapter 12 practice, click here.