Guest Commentary By David Warfield, Thompson Coburn
Chapter 12 Family Farmer Cases in Missouri
Agricultural economists have long warned of a looming farm crisis. However, for the most part, they have been wrong. In 2021, nationwide Chapter 12 family farmer bankruptcy filings were at the second lowest level since Chapter 12 was enacted in 1987. Te low level of Chapter 12 filings is all the more surprising given that Congress more than doubled the debt limit for Chapter 12 eligibility (to $10 million) in 2019.
Nevertheless, Chapter 12 remains an important tool for family farmers to manage financial distress. For 20 years, I have analyzed all Chapter 12 family farmer cases filed in Missouri to gain insight into how Chapter 12 works in practice. My methodology is simple. I identify all Chapter 12 filings by online docket searches for both the Eastern and Western Districts of Missouri. Aſter adjusting for various anomalies (such as jointly administered cases and cases mistakenly filed under Chapter 12), Missouri family farmers filed 168 unique Chapter 12 cases between 2000 and 2020. Tis analysis does not include six Missouri Chapter 12 cases filed in 2021.
OUTCOMES OF CHAPTER 12 CASES Tere are four primary possible outcomes in a Chapter 12 case. 1. Converted to Chapter 7 or dismissed before plan filed. If the debtor fails to file a plan, there are two possible dispositions of the case: convert the case to one under Chapter 7 or dismiss the case. Because of the Bankruptcy Code’s longstanding hostility to involuntary farmer liquidations, the court can convert a Chapter 12 case only if the debtor consents or the debtor commits fraud in connection with the case.
2. Case converted or dismissed aſter a plan was filed but before confirmation. Tis occurs when the family farmer files a Chapter 12 plan but is unable to obtain confirmation
22
mobankers.com
of a plan. If the debtor does not voluntarily convert the case to Chapter 7, the court will eventually dismiss the case.
3. Plan confirmed but no Chapter 12 discharge. Tis occurs when the court confirms a family farmer’s plan but does not thereaſter enter a discharge order. Unlike Chapter 11, where the discharge can be obtained on the effective date of the plan, a Chapter 12 discharge is normally not entered until all plan payments have been made. Many Chapter 12 debtors who confirm a plan later default in making the payments called for under the plan and never receive a discharge. Tese cases are typically either dismissed at some point aſter the default, or the debtor voluntarily converts the case to Chapter 7.
4. Plan confirmed and discharge entered. Te most desired Chapter 12 outcome is to obtain a confirmed plan followed by a discharge.
Table 1 summarizes the outcomes as of March 1, 2022, for all Missouri Chapter 12 cases filed from 2000-2020.
Result
Converted to Chapter 7 or dismissed
Converted to Chapter 7 or dismissed
entered before case dismissed or converted*
# of
cases 23
8
135 71
% of total cases 13.7%
4.8%
80.4% 42.3%
64
38.1% *excludes 28 pending cases where a plan confirmed but no discharge entered
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32
