Flooding

Iowa Flooding Could Force Farmers Into Bankruptcy

Recent flooding in Council Bluffs and throughout the state of Iowa has been devastating for farmers and could force many to file for bankruptcy. The flood damage is some of the worst that Iowa farmers have seen in the last decade, and it is likely to cost farmers billions of dollars. Indeed, according to a report in the Des Moines Register in early April, at that point in time the Iowa Farm Bureau anticipated that the flooding would cost farmers approximately $2 billion from losses involving “damaged grain, massive cleanup, and impassable roads and bridges to fields and livestock.”

In the last two months, recovery from the flood damage has been slower than expected, and rain continues to fall in Iowa. For some farmers, the flooding could result in bankruptcy. Family farmers in Council Bluffs and other parts of Iowa should learn more about how Chapter 12 bankruptcy or Chapter 7 bankruptcy may be able to help them avoid additional losses.

Heavy Rains and Flooding Prevent Farmers from Planting Crops 

As a recent report in PBS Newshour explains, although the majority of the major flooding occurred earlier this spring in Iowa and other parts of the Midwest, the region simply has not recovered. Accordingly, farmers have not been able to stay on their typical planting schedules, making this year’s farming season a particularly precarious one. Indeed, as the report clarifies, “lingering high water has delayed planting for many growers who can’t afford to miss out on a good crop this season,” and by and large “there’s not much some farmers can do.”

For example, one farmer in the region told PBS Newshour that his farm has lost approximately 500 acres of planting area as a result of the flooding. To be sure, those 500 acres “look like a big, muddy lake.” The loss of the 500 acres likely will cost that farmer more than $150,000 in income. To put that amount in perspective, many farmers expect their losses to exceed those from 2011, when substantial flooding caused damage across the Midwestern states.

Just how widespread is the problem? Based on data from the U.S. Department of Agriculture, by early June 2018, about 90 percent of all corn crops in the U.S. had been planted. In 2019, largely as a result of the flooding, only 67 percent of corn has been planted, and farmers in Iowa and surrounding states have had even worse luck with soybean planting. Unless the ground dries substantially by mid-June, it may be impossible for many farmers to make up for the losses to date.

Bankruptcy Due to Flooding and Lost Income

The recent flooding in Council Bluffs, Iowa could result in some farmers and their families being forced into Chapter 12 bankruptcy, Chapter 7 bankruptcy, or debt restructuring.

Chapter 12 bankruptcy is designed specifically for “family farmers” who have a “regular annual income.” It is a type of reorganization bankruptcy, and it allows family farmers to make a plan to repay all or a portion of their debts over a period of three to five years. For farmers in Iowa who anticipate losing significant profits this year but potentially getting back to normal in the following growing seasons, Chapter 12 bankruptcy could allow farmers to keep their businesses and to restructure debt.

For farmers in Iowa who have been struggling with profits for quite some time and do not anticipate being able to make up for this year’s losses caused by the flooding, Chapter 7 bankruptcy may be the best option. Chapter 7 is a liquidation bankruptcy that results in the liquidation of all non-exempt assets in order to repay creditors as much as possible. The benefit of Chapter 7 is that the debtor can get a fresh start once she or he receives a discharge.

Contact an Iowa Bankruptcy Lawyer

Do you have questions about how the flooding may lead to bankruptcy? An experienced Iowa bankruptcy attorney can speak with you today. Contact Telpner Peterson Law Firm, LLP today for more information.

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