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This time of year many farmers are in the process of assessing farm financials. If your farm, like many in the region, is facing tough economic times, don’t ignore the problem or attempt to “go it alone” and make hasty decisions. It may seem odd, when money is tight, to pick up the phone and call your lawyer and/or accountant; however, advice from experienced professionals may prove to be invaluable and will help you to make good decisions during a stressful time. In addition, farmers facing a tough financial outlook should take advantage of available resources to help manage the associated stress.
One the worst things an operator can do when faced with overdue bills, loan payments or calls from creditors is to bury his or her head in the sand and hope it will all go away. Most creditors will inform a debtor of a past due account by sending notices of default and acceleration or demand, followed by the intent to foreclose. If your overflowing mailbox is anything like mine this time of year, these type of notifications may be easy to overlook; however, ignoring this correspondence and failing to take action is not wise. Creditors are often more limited in what actions they can take after a debt has been accelerated or not paid for a certain period. Delay, therefore, will only serve to reduce your viable options. Even the best attorneys and accountants will need time to assess your financials and work with your creditors to come up with solutions. If your farm financials look bleak and creditors are calling, you will be well-served to be proactive and ask your trusted professionals for help sooner rather than later.
If instead of ignoring a bleak financial reality an operator opts to make quick decisions, not based on legal or tax advice, there may be unintended consequences. For example, renegotiations of debt or the sale of assets may have short term benefits but leave a debtor subject to unwelcome income tax obligations.
Another potential pitfall to avoid is to unwittingly fall victim to a debt restructuring scheme. According to Bud Stephen Tayman, Esq., a Maryland attorney who specializes in consumer debt and bankruptcy, “those in financial trouble are especially vulnerable to foreclosure scams. People having debt problems will seek help anywhere and will agree to anything which looks like it may help. It is only later or after the fact that they discovered that they have not been helped, and in fact, have been harmed.”
In order to successfully restructure your farm’s debts, an operator will be well served to seek legal advice from an attorney qualified in restructuring of consumer debts and bankruptcy. Bankruptcy is a specialized area of the law and not every attorney has the requisite experience to provide good legal advice related to bankruptcy. Farmers facing bankruptcy should, before they hire the individual, ask about the attorney whether he or she has bankruptcy experience.
Farmers may be hesitant to consider bankruptcy based on a fear that it will mean giving up the farm. Chapter 12 bankruptcy, however, is a bankruptcy option only available to family farmers and fisherman and allows the debtor to create a plan and use business income to pay off debts without the need to liquidate the operation. Many farmers may find filing for Chapter 12 a good solution to mounting debts, as it will allow them to continue farming while paying down their debts over an approximately 5 year period.
In additional to legal expertise, it can also be beneficial to find an attorney with knowledge of agricultural operations. A good way to find an attorney is through the Maryland State Bar Association (MSBA). The MSBA has sections or subgroups that lawyers may join based on their interests and experience. The consumer bankruptcy and agricultural law sections have many members who are qualified to guide farmers through economic trials and tribulations. The agricultural law section’s directory of lawyers can be found on the Agriculture Law Education Initiative’s website, umaglaw.org.
Farmers and families facing financial stress, legal issues or mental health concerns, should refer to the University of Maryland Extension’s (UME) Financial Stress Management resources available at https://extension.umd.edu/FarmStressManagement. Additionally, the Maryland Association of Soil Conservation Districts, in partnership with UME, is holding workshops this March to help the farming community detect early warning signs and prevention methods for severe mental stress and substance abuse. The workshops will be held at four locations around the state: March 5 (Chesapeake College), March 6 (Harford County Public Library, Bel Air), March 7 (Western Maryland (location TBD)), and March 8 (Charles Soil Conservation District). For more information, contact Danielle Bauer, 443-262-8491 or Danielle.firstname.lastname@example.org.