of action to tackle his or her financial distress. In contrast, inflating the value of assets on financial statements, guessing at the amount of crops on hand, or being overly optimistic with the numbers will create problems going forward.
David Tibbals is an associate at Fredrikson who assists clients with a variety of commercial, corporate, and state and local tax law matters. He can be reached at dtibbals@fredlaw.com.
Associate Samuel Andre’s practice focuses on corporate restructuring, creditors’ remedies, bankruptcy and commercial litigation. He is a member of Fredrikson’s Bankruptcy, Restructuring and Workouts Practice Group in Minneapolis. He can be reached at sandre@fredlaw.com.
2. Try negotiating with lenders and creditors. After assessing their current finances, one of the first actions a farmer should take to address their financial distress should be to continue to negotiate with his or her lenders and creditors in an attempt to avoid any need to file for bankruptcy. During these negotiations, the farmer may agree to: a modified payment plan under which he or she could make payments over time instead of on any original payment terms, to the sale of certain equipment or unused real estate to earn cash with which to pay off parts of his or her debts, or enter into a forbearance agreement under which the lender or creditor may agree to stop from collecting on debts for a short period of time while the farmer searches for new financing. Through each of these efforts, a farmer can gain at least a short period of respite from debt collection. However, before agreeing to anything with a lender or creditor, any such agreement should be in writing, and the farmer should obtain and review all of the terms of the agreement in order to fully understand his or her rights. 3. As a last resort, file for bankruptcy. Where all other efforts fail, a farmer can weigh the nuclear option of filing for bankruptcy. In a bankruptcy case, an automatic stay is put in place that immediately stops all collection efforts by the farmer’s lenders and creditors and any other actions affecting the property of the
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bankruptcy estate (which consists of the real property and assets of the farmer). A bankruptcy case under Chapter 11 or Chapter 12 of the Bankruptcy Code lets the farmer keep operating his or her farm while attempting to reorganize the farm’s finances and debts and avoid a liquidation or foreclosure that would end the farm’s business operations. A farmer’s reorganization will need to satisfy certain requirements, and the cost of a bankruptcy case can be expensive due to administrative costs, making bankruptcy a drastic decision and one that should normally be saved as a last resort in order to save a farming business in a Hail Mary effort. 4. When in doubt, consult with experts. Farmers should not be expected to be experts on how to deal with their financial distress. Instead, lawyers, accountants, or business professionals with expertise in negotiating troubled loans, workouts, and bankruptcy will be willing to consult and provide affordable options for providing assistance, and many do not charge for an initial consultation. At the very least, it can be critical to talk with a trusted financial adviser on how to confront problems with a lender or other creditors. While the lingering effects of the nation’s trade war continue to cause potential problems for North Dakota’s farmers, these hard-working citizens of the state have tried-and-true options for facing those problems head on. By understanding those options, these farmers cannot only survive the current economic climate, but thrive.