"I'm pleased to take us one step closer to providing a permanent safety net for the economic risks associated with a family farming operation," said Grassley. "As farmers bring in the fall harvest, I'm working to help more family farmers survive and benefit from the lucrative opportunities of expanding foreign markets in our global economy."
A decade has passed since Grassley first wrote a new provision of the bankruptcy code in response to the farm crisis in the 1980s. At the time, he said the landmark bankruptcy legislation enacted during the Great Depression which protected farmers was allowed to lapse. His legislation led to Chapter 12, which prohibits lenders from foreclosing on property if the farmer is able to make rental payments. In addition, farmers are not required to obtain creditor approval of their reorganization plans upon application.
Grassley noted that a review of Chapter 12 by Iowa State University showed that it helped at least 80 percent of Iowa farmers who filed in 1986 and 1987 to stay involved in farming through 1994. "Chapter 12 provides a basic tool to help family farmers get out of debt and still continue in the business of farming," said Grassley. "Making this a permanent federal law will provide certainty for the family farm in the 21st century."
The Family Farmer Protection Act is co-sponsored by Minority Leader Tom Daschle of South Dakota.
The Judiciary Committee also approved Grassley's legislation, The Investment in Education Act, which would address two provisions of federal bankruptcy law that essentially work to deplete local governments of tax revenue. Grassley said that may include funds for local schools, public safety, parks and recreation, street maintenance, and law enforcement and fire fighting authorities.
According to Grassley, current law allows corporations declaring bankruptcy to get their property tax liabilities lowered. "Because a federal bankruptcy judge is allowed to lower the assessed value of a bankruptcy estate, the property taxes owed to the city or county are cut," said Grassley. "This federal provision specifically circumvents state law. What's more, it allows out-of-state judges to determine the fair market value of property in Iowa, as an example."
Grassley said that a second provision essentially tells local governments to get in the back of the line. Current federal law puts lawyers' fees and other creditors ahead of the tax liens owed to local governments. "My legislative proposal would make sure local government tax liens get fair access to a bankruptcy estate so that local taxpayers aren't shortchanged on important neighborhood services," he said.
Grassley's legislation has been endorsed by the Iowa Association of School Boards and the National Association of School Boards. In addition, the U.S. Department of Justice this week wrote Grassley in support of his legislation.
Grassley's legislation also provides that debtors can't use the bankruptcy code to evade paying child and spousal support. Grassley said his bill would make it clear to federal bankruptcy courts that these debts can't be erased just because someone declares bankruptcy.
Grassley serves as chairman of the Judiciary Subcommittee with primary jurisdiction over the nation's bankruptcy laws. Later this month, Grassley plans to hold a congressional hearing to review the formal recommendations of the National Bankruptcy Review Commission. Grassley co-authored a 1994 comprehensive bankruptcy reform measure which charged the commission to conduct a thorough review of the federal bankruptcy code.