Chapter 12: Special Bankruptcy for Farmers
Chapter 12: Special Bankruptcy for Farmers
Alright — what’s going on in agriculture right now?
Farms and their finances today are completely
different from what they were a century ago. So, let’s dig past the headlines
and find out what’s really going on.
When we hear about a “farm bankruptcy crisis,” what does
that really mean?
First things first — yes, farm bankruptcy rates have been
rising in the last few years. But that’s from historic lows. When you
look at the data, you can see the bigger picture.
And it’s not just farms. Everyone’s filing for bankruptcy
more right now — individuals, businesses — across the board.
This isn’t just a farm problem. It’s a U.S. economy
problem.
What’s wild to me is that everyone knows farm bankruptcies
are going up, but nobody’s talking about the fact that all bankruptcies
are going up. There isn’t a special farm bankruptcy crisis. There’s a general
bankruptcy problem — and farms are part of that.
So, what’s going on here?
Well, one big part of it is the farm lobby. Their job is to
keep pushing stories about how the farm sector is in crisis — so people panic —
and Congress sends more money to farmers.
That’s what’s happening.
You see it with stories about “farmer suicides,” too. And
listen — as someone who’s lost people to suicide, I don’t take that lightly.
But the farmer suicide rate? It’s actually right in line with the rate for
older, rural white men with guns.
It’s not unusually high. In fact, farmers don’t even make
the top 20 occupations for suicide rates.
But the farm lobby keeps this narrative alive — because
their job is to keep the money flowing.
So today, I want to talk about farm bankruptcy — and all the
financial background that the news doesn’t tell you. Not because journalists
are bad people, but because most folks — including journalists — don’t really
understand agriculture.
When all the information about farming comes from the farm
lobby — which wants your money — you end up with scarier and scarier headlines
that don’t tell you what’s actually happening.
Here are the key things to know:
First: Farmers are not more likely to go
bankrupt than other Americans. That could always change — like with the soybean
situation — but right now, it’s not true.
Second: Bankruptcy for farms doesn’t mean what it
means for the rest of us. Farms have a special kind of bankruptcy —
Chapter 12 — that’s much softer, much cushier, and usually allows the farmer to
keep right on farming.
It doesn’t mean the farm is over. It’s more like a reset
button. Bankruptcy is how many farms stay in business — not how they go
out of business.
And third: Surges in farm bankruptcies don’t mean
agriculture is dying. In fact, some of the biggest periods of growth in U.S.
agriculture came after big waves of bankruptcies.
Now — how does that work? Let’s break it down.
First, let’s talk about who “family farmers” actually are
today.
Most small family farms in the U.S. are millionaires
with six-figure incomes. I know that sounds strange — it’s not what we’ve
always heard.
For generations, we were told small family farms were poor
and struggling — and for a long time, that was true. But after a century of
pushing the poorest farmers out of the business, who’s left?
Wealthier families.
So today, most small family farmers are pretty well-off.
If you hear “farm bankruptcy” and picture the Great
Depression — people losing the homestead — that’s not what’s happening anymore.
Farm country today is not the farm country of your
grandparents.
And yet, the news still runs on that old narrative — because
everyone’s grown up hearing it.
Urban audiences are shocked when I say farmers are generally
wealthy. Rural audiences? They just nod.
The only people surprised are city folks.
Bottom line — farmers today are not poor peasants. They’re
often families on strong financial footing, better off than most Americans.
So if we’re worried about bankruptcy protection — maybe we
should be more worried about the average American than about farmers as a
special class.
Now, about that special treatment: Chapter 12 Bankruptcy.
You’ve probably heard of Chapter 7 or Chapter 11 — those are
for individuals and businesses.
Chapter 12, though, is just for family farmers and
family fishermen.
It’s designed to help them keep their farms or boats without
having to sell everything off.
Most of us think bankruptcy means losing everything —
selling your home, your property, your business — to pay off your debts.
Not for farmers.
Chapter 12 is more like hitting pause. It gives you time to
reorganize, come up with a repayment plan, and get back on your feet.
You can sell some land to pay debts — but you don’t have to.
And if you do sell land under Chapter 12, you don’t pay capital gains
tax on it.
That’s a big deal — it means you don’t have to sell nearly
as much land to get solvent again.
So Chapter 12 isn’t about ending farms — it’s about saving
them.
It’s a special privilege — one that nobody else gets.
Now, to qualify, more than half your income and half your
debts have to come from farming. So if you’re a dentist with a few chickens,
you don’t qualify.
That’s fair — it’s meant for real farmers.
But in 2019, Donald Trump expanded who qualifies. He raised
the debt cap from $3 million to $11 million — and lowered the income threshold.
That means a lot of wealthy landowners now qualify
for Chapter 12 protections — people who may not even work the farm themselves.
So, as the economy slowed down, more wealthy agricultural
investors started using Chapter 12 to protect their assets — and that made it look
like farm bankruptcies were rising sharply.
They were — but not because small farms were collapsing.
It’s because more people now qualify to file as farmers.
So what we’re seeing today isn’t a farm crisis — it’s an economic
one.
Trade wars, labor shortages, high interest rates — these
affect everyone. And yes, farms are part of that economy.
Another thing: there’s always something in crisis in
agriculture.
If the weather’s bad — low yields.
If the weather’s great — oversupply and low prices.
There’s always bad news somewhere in the farm sector. And
that means the farm lobby will always have a headline to scare people
with.
Finally, let’s talk about farms going out of business —
because it’s not the end of the world.
In fact, it can be healthy for agriculture.
When old farms go under, new farmers can enter. That’s how
the system renews itself.
During the Great Depression, we actually saw more new
farms start — because land became available.
Bankruptcies free up resources, reset the market, and bring
in new energy.
That’s exactly what Chapter 12 is for — it lets farmers shed
debt, reorganize, and keep the system moving.
Even the “farm crisis” of the 1980s — which devastated rural
communities — barely made a dent in national food production. Agriculture is remarkably
resilient.
The idea that “if farms go bankrupt, Americans will starve”
— that’s just not true.
Even now, the farms most threatened by trade wars are those
growing exports like soybeans or tobacco — not food for Americans.
So let’s separate “farmers are struggling” from “our food
supply is in danger.” Those are two very different things.
So, to wrap up:
Right now — mid-October 2025 — most farmers in the U.S. are
still doing better than most Americans. Many Americans can’t even afford
a $400 emergency.
I want agriculture to thrive — but that has to come from
doing good work, not from fear campaigns or bailouts.
Farming should be about responsibility, wisdom, and
long-term planning — not about panicking Congress into sending more checks.
That’s the real story behind Chapter 12 — and behind the
so-called “farm bankruptcy crisis.”
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