by Samantha Ayoub, Economics Intern, American Farm Bureau Federation
Chapter 12 Bankruptcy provides family farmers with flexibility to carry on normal business operations while making reasonable payments towards their debt load, even when facing the risk and uncertainty of agricultural production.
The measure was introduced into law as a temporary measure in 1986 but became permanent in 2005 due to its success streamlining the filing process and addressing the large debts of farming operations. AFBF Market Intel reports have long followed the annual filings of Chapter 12 bankruptcies nationwide as an indicator of farm financial health.
The good news for 2023 is that farm bankruptcies have once again reached a record low since Chapter 12 became permanent. Coming off a year of record-high commodity prices and subsequently high net farm incomes in 2022, overall farm loan delinquency rates also dropped in 2023.
According to the U.S. Courts, 139 farm bankruptcies were filed in 2023, down 18% from 2022. This continues a four-year decline since the decade high of 599 filings in 2019. Unfortunately, this downward trend in farm bankruptcies is unlikely to continue.
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