Details Matter!
As stress builds in the farm sector, care must be taken if the farmer is considering filing for Chapter 12 bankruptcy. This type of bankruptcy was specifically put into law to help farmers reorganize their debts and continue farming. One of the nice features for farmers is the ability for income taxes related to selling assets in the Chapter 12 bankruptcy to be treated as unsecured debts. This allows the farmer more flexibility in arranging their affairs to emerge from bankruptcy on a more sound basis.
However, Chapter 12 is only available if your total aggregate debt is less than an inflation adjusted limit (currently $4,153,150). Legislative effort has been made to increase this limit but has failed so far.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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