Between a Rock and a Hard Place: Defaulting on FSA Loans

The useful part

Defaulting on FSA Loans – National Agricultural Law Center 29 Sep Between a Rock and a Hard Place: Due to the cyclical nature of agriculture, producers are "price-takers" and susceptible to market fluctuations, increased input costs, unpredictable weather conditions, deadly disease outbreaks, and trade disruptions. When a borrower fails to repay their loan or violates their loan agreement, this is known as defaulting.

How it works

• Therefore, it is important for producers to be aware of the warning signs so they can work with their lender to repay their loan and prevent foreclosure.
• However, some lenders may utilize a separate legal agreement called a loan agreement, to the promissory note, that includes customized terms, conditions, and covenants.
• City defines a loan default as "failure to repay a loan." However, a lender may also issue a default declaration if the borrower breaches a covenant in the loan agreement, even if they have kept up with...
• However, off-farm financial stressors may also contribute to loan delinquency such as illness, death, personal debt, and lack of succession planning.
• At that point, the lender may require immediate payment of the entire outstanding loan, and if the borrower cannot pay the entire balance, the lender may foreclosure or liquidate the collateral pledged to...

What to take from it

As discussed in the first article of this series, the roadmap to foreclosure of a farmer's debt depends on the type of loan, collateral, loan agreement, and lender. This article examines the initial loan status determinations that must be made for an FSA borrower to be eligible for loan servicing options or for the lender to start foreclosure proceedings. When a lender issues a loan to a borrower, the goal is to assist the borrower by providing financing while at the same time, recouping that money plus interest through scheduled loan payments.

Example or evidence

• Collateral types can include real property, tangible personal property, and intangible personal property.
• Tangible personal property includes farm products, crops, farm equipment, or livestock.
• Intangible personal property includes items like accounts receivable, crop insurance payments, federal farm program payments, or grower contract proceeds.
• A loan is considered "secure" when the borrower pledges collateral in exchange for the loan funds- in other words, when the lender has a security interest or a lien in the collateral.

Details worth keeping

Defaulting on FSA Loans Categorized Ag & Food Law Update, Bankruptcy, Between a Rock and a Hard Place, Farm Service Agency, Federal Loan Programs, Finance and Credit, Mary Eichenberger, Secured Transactions Agricultural operations are capital intensive, often requiring producers to take out loans to fund operating costs. This security interest gives the lender the right to take possession of the collateral and foreclose or sell the collateral to pay the debt. A lien is a "legally enforceable claim" on real or personal property that is used to secure repayment of a debt, or it can be "an encumbrance on property to enforce payment of an obligation." 7 C.F.R.

Related coverage

• Nationalaglawcenter: According to the U.S. Department of Agriculture ("USDA") Economic Research Service ("ERS"), the total amount of farm debt in 2025 was...
• Localnews8: The pause on federal student loan repayment ended in September 2023.
• Thecollegeinvestor: ED and Treasury launched the Defaulted Loans Support Center on StudentAid.gov, letting borrowers apply online to rehabilitate or consolidate defaulted loans.