The Family Farmer Relief Act of 2019 passed the Senate by voice vote and now heads to the president.
The bill was co-sponsored by Iowa Senators and Representatives and extends the cap farmers can file for Chapter 12 bankruptcy mainly because of an increase in land values.
The average price of an acre of land in Iowa is about $7,200. According to Iowa State University, that's up from a couple thousand in the 1980s and 1990s, when Chapter 12 bankruptcy was put in place because of the farm crisis.
The National Agricultural Statistics Service says the average farm size in Iowa is 350 acres, in that case the average farmer owns about $2.5 million of land, which is used to produce food, maintain their business, and create their income.
If a farmer falls on hard times, they can file for that Chapter 12 and maintain control of the high-value property to a cap of $4 million so they can stay in business.
Now if you add the millions of dollars in farmland because of increased values, then add the cost of farm equipment, houses, and other business needs, medium-sized farmers could easily exceed that cap even if their take-home income is not very much. This is why the Family Farmer Relief Act changes the debt cap covered by Chapter 12 from $4 million to about $10 million, only the largest 2019 farmers filing for bankruptcy could surpass that cap.
The bill passed in a bipartisan manner to reach the president's desk. It was sponsored by Iowa's Republican Sens. Chuck Grassley and Joni Ernst and Iowa's Democrat Reps. Cindy Axne, Abby Finkenauer and Dave Loebsack.
Bankruptcies are on the rise in farm country, according to the American Farm Bureau. Since June of last year, there have been a total of 535 Chapter 12 bankruptcy filings. That's an increase of 13%, about half occurred in the Midwest.