Farm financial stress shows up in more than one bankruptcy chapter

# What the story says

Elizabeth Rumley, senior staff attorney at the National Agricultural Law Center, cautions that farm financial stress appears in more than one bankruptcy category. She says Chapter 12 is a specialized option for family farmers and fishermen who have regular annual income, but it excludes operations that don't meet specific tests.

# Why Chapter 12 isn't the whole picture

That means some agricultural businesses under pressure will use Chapter 11 instead.

# When farms use Chapter 11

Chapter 11 is a broad business-reorganization chapter available to any type of business. Rumley explains several circumstances push farm-related businesses toward Chapter 11:

• Size: larger operations with greater debts can exceed Chapter 12's debt limits.
• Organizational structure: some farms are organized as corporations, LLCs, or other entities that make Chapter 11 a better fit.
• Income mix: households where operators rely substantially on off-farm wages can fall below the 50% agricultural-income threshold and become ineligible for Chapter 12.

Chapter 11 permits reorganization while continuing operations, but it operates under different procedures and protections than Chapter 12.

# Why tracking both chapters matters

Rumley says the National Agricultural Law Center monitors filings in both Chapters 11 and 12 because relying on Chapter 12 counts alone will understate the degree of financial strain in the agricultural sector. Observing both categories captures stress among traditional family farms and among larger or more complex ag businesses.

# Practical implications for farmers and advisors

If a producer or ag business faces distress, eligibility rules should be one of the first points checked. The choice between Chapter 12 and Chapter 11 affects the reorganization timeline, procedural requirements, and how creditors are treated. Households with significant off-farm income or entities with larger debt loads should evaluate Chapter 11 options alongside Chapter 12 possibilities.

# Bottom line

Bankruptcy filings tied to agriculture are not confined to the Chapter 12 category. Counting only Chapter 12 cases misses many operations that use Chapter 11 because of income composition, debt size, or legal structure. A comprehensive view of farm financial stress requires attention to both chapters.