The U.S. Senate on Thursday voted to raise the debt cap for Chapter 12 bankruptcy filings to make more farms eligible to reorganize their debt under the rules.
The Family Farmer Relief Act of 2019 raises the debt limit from $4.4 million, adjusted for inflation in April, to $10 million.
The House passed a companion bill on July 25.
Legislators said the higher cap reflects the increase in land values and growth in the size of average farms over time and is meant to give farmers additional options in managing the downturn in the farm economy.
The legislation was supported by the American Farm Bureau Federation and National Farmers Union.
Farm bankruptcies are at a record high in some parts of the country, Zippy Duvall, the Farm Bureau president, said in a statement.
Farmers have faced several years of a trying farm economy, and updating Chapter 12 bankruptcy eligibility is a necessity, he said.
“The bill gives more farmers an opportunity to qualify for financial restructuring so they can keep their land and livelihoods,” he said.
The bill will help more family farmers avoid liquidation or foreclosure, Roger Johnson, NFU president, said in a statement.
“Chronic overproduction, an ongoing international trade war and a series of extreme weather events have created a perfect storm for the farm economy. Farm debt is at a record high, and too many operations have been pushed to the brink financially,” he said.
The legislation will help more family farmers access Chapter 12 relief, giving them a fighting chance to stay in business, he said.
Farm loan delinquency rates are at a six-year high, and Chapter 12 bankruptcy filings increased 13% during the last 12 months through June for a total of 535, Farm Bureau economists recently reported.
The increase in the debt cap was also supported by the American Bankruptcy Institute and the American College of Bankruptcy.
It was opposed by the American Banking Association, which warned Congress that such a large increase would increase borrowing costs and decrease the availability of credit for farmers.