House to Consider Bankruptcy Bill

October 5, 1999

The House is expected to consider this week legislation that extends for nine months the bankruptcy chapter designed for family farmers and ranchers. The Senate approved the bill last week. The extension would be effective from Oct. 1.

Technically chapter 12 bankruptcy protection has lapsed, because the House and Senate passed different versions of a temporary extension. But, says Sen. Charles Grassley (R-IA), a major proponent of the extension, House action on the Senate bill followed by President Clinton's signature can avoid any problems because the extension is effective retroactively to Oct. 1.

Chapter 12 was enacted in 1986 but was not made a permanent part of the federal bankruptcy code. The latest legislation would make it permanent. Unlike Chapter 11 of the bankruptcy code, that governs corporate reorganizations, Chapter 12 does not require a financially distressed farmer to get the consent of creditors prior to reorganization.

Also, unlike Chapter 7 of the bankruptcy code, which is a form of liquidation, a financially distressed farmer doesn't have to surrender the farm to creditors. Chapter 12 prohibits lenders from foreclosing on property if the farmer is able to make rental payments.