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Delmarva Farmer Columnists

 

Chapter 12: Reorganizing the family farm (July 26, 2016)

Ag Law

By Ashley Ellixson, Legal Specialist, University of Maryland, CANR Agricultural and Resource Economics

I know what you may already be thinking: bankruptcy is such a gloomy topic. It is just that: Gloomy.
However, sometimes it may be the best option to enable the family farm to continue operating far into the future.
Today, I will walk through what Chapter 12 bankruptcy is and the how, who, and what questions surrounding the whole process.
It is important, however, to consultant an attorney on your unique situation before moving forward with a bankruptcy filing.
Chapter 12 was designed to meet the economic realities of the family farm or family fishery.
Although created in 1986 in response to the nationwide farm financial crisis, Chapter 12 was made permanent only recently, in 2005.
Chapter 12 makes it possible for family farms and fisheries to restructure or reorganize to become viable in the future despite a current hardship or economic crisis.
Chapter 12 bankruptcy, as opposed to other chapters of bankruptcy, is designed for “family farmers” or “family fishermen” with “regular annual income.”
It enables financially distressed family farmers and fishermen to propose and carry out a plan to repay all or part of their debts.
Who Can File for
Chapter 12 Bankruptcy?
Family farmers and fishermen fall into two categories for qualification purposes:
• Individual or Individual & Spouse
• Must be engaged in farming or commercial fishing operation
• Total debts of the operation must not exceed $4,031,575, or $1,868,200 if they are fishermen
• At least 50 percent of debts must be related to farming operation, or 80 percent of total debts on commercial fishing operations (in both cases excluding home mortgages), and
• At least 50 percent of gross income from preceding tax year must come from farming
• A Corporation or Partnership
• More than 50 percent of outstanding stock or equity must be owned by one family or by one family and relatives
• Family must conduct farming or fishing
• More than 80 percent of value of assets must be related to farming or fishing
• Total debts of the operation must not exceed $4,031,575, or $1,868,200 if they are fishermen
• At least 50 percent of debts must be related to farming operations or 80 percent for fishing operations
• If there is stock, it cannot be publically traded.
What Is the Process?
The bankruptcy code requires a precise process to follow during any chapter of bankruptcy. The exact order of events are:
• Farmer/fisherman receives credit counseling from an approved credit counseling service
• Farmer/fisherman files a Chapter 12 petition with the bankruptcy court
• Twenty to 35 days after filing petition, the bankruptcy court holds a meeting of creditors
• Within 90 days of filing the initial petition, the farmer must submit a reorganization plan to the court
• The court confirms or rejects the plan
• If confirmed, the farmer/fisherman will stay in bankruptcy three to five years
• The farmer/fisherman is discharged from bankruptcy and continues to make long term debt payments
What Happens After the
Three or Five Years?
The debtor (farmer or fisherman) will receive a discharge after completing all payments under the Chapter 12 plan as long as the debtor certifies all domestic support obligations were paid.
To review, domestic supports include alimony or child support.
Alternatively, the court may grant a “hardship discharge” to a chapter 12 debtor even though the debtor has failed to complete plan payments. This is available only to a debtor who failed to complete plan payments due to circumstances beyond the debtor’s control and through no fault of the debtor.
For example, a farmer or fisherman with an injury or illness precluding employment may result in a hardship to repay debts.
Possibly one of the most advantageous parts of Chapter 12 is the ability of the farmer or fisherman to reduce secured debt to the value of the collateral. For example, a farmer borrows $400,000 to purchase dairy cows which provide the collateral to secure the loan.
Those dairy cows are determined to be worth $200,000 at the time of bankruptcy — thus the secured debt would be reduced to $200,000 while the remaining $200,000 would be considered unsecured debt.
Another point to remember is that a husband and wife may file a joint petition or individual petitions.
The official forms for Chapter 12 bankruptcy may be purchased at legal stationery stores or downloaded at www.uscourts.gov/bkforms/index.html.
Note: Again, it is important to first consult an attorney with bankruptcy expertise. This post is not to be considered legal advice or a thorough explanation of all Chapter 12 bankruptcy details.

 

A win for wildlife is a win for agriculture (July 26, 2016)

Keeping the Farm

By Genevieve Lister, Public Affairs Specialist, Natural Resources Conservation Service, Maryland

One-third of the land in Maryland is privately owned agricultural land, and these productive working farms produce the food and fiber essential to the Nation’s security and the health and well-being of its citizens. These lands also provide much of our state’s open space and the habitats wildlife need.
USDA’s Natural Resources Conservation Service works in close partnership with agricultural producers and other conservation partners to maintain productive working landscapes while integrating wildlife friendly conservation practices.
To better maximize the outcomes achieved through this win-win approach to conservation, NRCS launched the Working Lands for Wildlife partnership in 2012.
WLFW is the overarching concept of how NRCS works with partners and private landowners to focus voluntary conservation of working landscapes using target species as the barometers for success. Target species are used because their habitat needs are representative of healthy, functioning landscapes where conservation efforts benefit a much broader suite of species.
The bog turtle, America’s smallest turtle, is a target species that calls Maryland home. Bog turtles depend upon a habitat mosaic of open, sunny, spring fed wetlands and scattered dry areas.
The wetlands also support many rare plants and animals.
Private landowners control the majority of bog turtle habitat remaining in Maryland.
The greatest threats to bog turtles include habitat degradation and fragmentation from land conversion, habitat succession due to invasive exotic and native plants, and illegal trade and collecting.
Changes in land use or alterations in water flow reduce a wetland’s ability to function.
Wetland habitats have been drained and filled for development, agriculture, road construction and impoundments have severely fragmented the remaining habitat and have created physical barriers, isolating existing bog turtle populations. Many of the wetlands are located in agricultural areas that are subject to frequent livestock grazing. Proper grazing management conserves habitat by slowing natural plant succession and minimizing the encroachment of invasive native and exotic plant species.
Through Working Lands for Wildlife, Maryland NRCS is working to restore 10 bog turtle sites.
By placing an easement on their land and restoring the habitat, these landowners are combating habitat fragmentation and degradation to restore bog turtle populations with the confidence that the conservation practices they volunteer to implement will not harm the species or its habitat.
Bog turtles can be an indicator of water quality and wetland function; the wetland habitats that they require provide important ecosystem services, including purifying water, recharging underground aquifers and absorbing floodwaters. In environmentally sensitive areas such as the Chesapeake Bay Watershed, a return of bog turtles will be a welcome site.
Successes achieved for wildlife are also wins for agriculture, as both are dependent on sustainably managed lands.
To learn more about Working Lands for Wildlife and NRCS, visit www.md.nrcs.usda.gov, or your local USDA Service Center.