Chuck Grassley

United States Senator from Iowa





Grassley Seeks Permanent Status for Chapter 12

Mar 31, 1997

Grassley Seeks Permanent Status for Chapter 12

Iowa Senator Backs Effective Tool, Financial Viability for Family Farmers

Jill Kozeny


Calling it "a trial run that proved a great success," Sen. Chuck Grassley today announced that he will seek permanent status for Chapter 12 of the federal bankruptcy code, a provision which allows family farmers to reorganize their debts and continue their farming operations while working off their debts.

"The future looks bright for Iowa's family farmers. Today, we see profitable market prices and high land values. Furthermore, the Midwest is well-positioned to meet the demands of expanding foreign markets in our global economy. As farmers face the new challenges of agriculture in the 21st century, I want Chapter 12 to be there to help more family farmers survive and benefit from these ripe opportunities," Grassley said.

Grassley introduced the bill which led to Chapter 12 in response to the turmoil of the farm crisis in the 1980s. At the time, he said the landmark bankruptcy legislation enacted during the Great Depression did not adequately address the circumstances of the farm crisis. A key provision of Chapter 12 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. Under previous law, a farmer's reorganization plan could be voted down by his lenders and other secured creditors, something that happened all too frequently.

The first formal 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. "This is a much higher survival rate than expected when I introduced the legislation," Grassley said. "Chapter 12 proves that common sense legislation can make a positive difference. Congress should make permanent this effective tool which has helped so many family farmers retain stewardship of the soil and continue in the business of farming."

As adopted in October 1986, Chapter 12 is scheduled to expire in 1998. Grassley said that he wants to take advantage of likely consideration by Congress this year of bankruptcy reform legislation to make Chapter 12 a permanent part of the bankruptcy code. Grassley serves as chairman of the Judiciary subcommittee with primary jurisdiction over bankruptcy policy. In 1994, he co-authored a major bankruptcy reform measure which became law.