COVID-19 is pushing Farm Bankruptcies Higher
Today, farm bankruptcies remain on the rise, spiking even higher on the heels of a global pandemic. Here is what you need to know about the impact of COVID-19 on the farming industry.
2020 has been a tough year for the farming industry. Farms finally starting to recover from years of adverse crop weather and trade wars with China were hit hard again by COVID-19. Today, farm bankruptcies remain on the rise, spiking even higher on the heels of a global pandemic. Here is what you need to know about the impact of COVID-19 on the farming industry.
Why are farm bankruptcies on the rise during COVID-19?
In the height of the pandemic, nationwide quarantines resulted in closed schools and restaurants, which led to a significant change in demand for farm products like milk, pork, and fresh produce. There was still a demand for food, but as schools closed, food pantries were swarmed, and restaurants switched to take-out only options, there was a kink in the supply chain as the world made adjustments to keep people safe. Despite the rush on grocery stores and food banks as panicked Americans stocked up on the essentials, many farmers were left with resources they could not sell resulting in lost wages and wasted product due to the supply chain hiccup.
This struggle exacerbated the ongoing strain on the farming industry from years of extreme weather that made farming difficult and expensive tariffs arising from recent trade wars with China. The farming industry is volatile by nature, but these events impacted the farming industry so greatly that many American farmers had no choice but to seek federal aid or declare bankruptcy.
What is Chapter 12 bankruptcy?
Chapter 12 Bankruptcy is an option for struggling farmers to save their livelihoods. When a farm files for Chapter 12, the farm may continue normal operations while making regular payments on debt. Payment plans under a Chapter 12 filing are affordable. Farm assets are protected from liquidation, and farmers avoid high-interest rates that can make getting out of debt feel impossible. Chapter 12 also offers farmers a hardship discharge when a medical crisis, natural disaster, or other special circumstances like COVID-19 limit the farm’s ability to continue normal operations.
How can a farm avoid bankruptcy in COVID-19?
Federal aid is available to farmers impacted by the pandemic. Farmers are eligible to receive up to $250,000 in federal aid through the Coronavirus Food Assistance Program. A pandemic-related price loss of five percent or more qualifies farms for this relief. Because there is limited funding available, it is important to apply for this aid promptly. Qualified farmers will receive most of the eligible funds upfront, with remaining funds to be disbursed later. For more information about this program or to apply for aid, visit the USDA website at farmers.gov.
Contact a Farm Bankruptcy Attorney today
If your farm has experienced financial strain due to increased marketing costs or a change in demand from COVID-19, you have options. Contact our experienced farm bankruptcy attorneys to learn more about federal aid, bankruptcy, and to find out which option is best for you.