Grassley Introduces Extension of Chapter 12 Bankruptcy for Farmers
WASHINGTON — Sen. Chuck Grassley today said that he has introduced a bill to temporarily extend a section of the federal bankruptcy code tailored to help farmers reorganize debt and stay in the business of farming. The bill is being introduced with Sen. Patrick Leahy, of Vermont.
Congressman Nick Smith, of Michigan and Congresswoman Tammy Baldwin, of Wisconsin today are introducing similar legislation in the House of Representatives.
"I've been working to secure comprehensive bankruptcy reform that would make improvements to the current system, including permanent inclusion of Chapter 12. Farmers have been treated like second-class citizens for too long in bankruptcy proceedings," Grassley said. "This temporary measure will provide our family farmers with the necessary bankruptcy protections during hard times until Chapter 12 can be made permanent in comprehensive reform."
Chapter 12 is the only temporary chapter in the federal bankruptcy code. This legislation would keep the section on the books until July 1, 2005.
Chapter 12 was first written to help family farmers survive the Great Depression. The law expired in the early 1950s. During the farm crisis in the mid-1980s, Grassley led the effort in Congress to bring back this safety net for family farmers facing economic collapse.
In recent years, Grassley has been advocating a comprehensive overhaul of the nation’s bankruptcy code which would include making Chapter 12 a permanent part of the bankruptcy laws. In addition, part of Grassley’s broad-based proposal would expand family farmer eligibility for Chapter 12 bankruptcy protection and reduce the capital gains tax burden for farm assets sold as part of a reorganization plan. In effect, this would allow farmers to sell grain, livestock and other farm assets to generate cash flow which is essential to maintaining a farm operation.
"Comprehensive bankruptcy reform is necessary to bring more fairness for those who work hard to pay their bills. Every bankruptcy filed puts upward pressure on interest rates, so decreasing the number is good for people trying to buy a new house or pay for a car," Grassley said.
Unlike Chapter 11 of the bankruptcy code, which governs debt reorganizations for non-farm businesses and corporations, Chapter 12 is designed specifically for financially distressed farmers and ranchers. It addresses the unique risks associated with a family farming operation. Chapter 12 gives financially-strapped farmers a cushion to reorganize debt without the consent of creditors. And unlike Chapter 7, which is a form of liquidation under the bankruptcy code, a farmer seeking bankruptcy protection doesn't have to surrender the farm to creditors if he is able to make rental payments.
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