From Debt to Deliverance: Jerry and Deb
Poor crops. A barn fire. Disabling injuries. New bank managers who don’t know you and are less cooperative than the ones they replaced. Our clients have experienced devastating events like these, and more. Events that threatened to leave them destitute.
In this month’s blog, and in April and May, we’ll share stories of three farm families who accumulated stifling debt and came out the other side with financial stability and peace of mind working with us. We begin with Jerry and Deb:
Jerry and Deb were living comfortably on their eastern Iowa farm. Between raising Simmental cattle breeding stock, Jerry’s construction business, and Deb’s job at a local community college, all was right with the couple entering the new millennium.
Trial by fire, and then some
Then came 2002. A barn fire destroyed their feed inventory, and most of the machinery housed inside. Insurance was $60,000 short of replacing what was lost. “It was almost a precursor of what was to come,” Deb says.
A 2005 drought hurt Jerry’s hay production, forcing him to dip into winter feed for his cattle. Moving hay one day Jerry was thrown from a four-wheeler, breaking both arms. He recovered just in time to shatter a leg and ankle in 2006 when a scaffold he was standing on gave way.
Further pain arrived in 2008 when the farm economy cratered. The couple rapidly accumulated hundreds of thousands of dollars of debt. Their bank demanded loan payments – money Jerry and Deb didn’t have. Foreclosure loomed large.
“In 2006 I felt we could come out of it, so we kept plugging away,” Jerry says. “Then 2008 hit and the financial institution matter happened, and I thought that would be the end of us.”
An alternate bankruptcy plan
Jerry and Deb talked with financial advisors, who recommended they file Chapter 11 bankruptcy. Jerry refused, convinced there was a better way. “I gave Joe Peiffer a call and he said, ‘No, you don’t want to file Chapter 11. You should file Chapter 12,’” Jerry says. “He probably knew the Chapter 12 tax code better than anyone else in Iowa.”
Chapter 12 was written in the wake of the farm crisis in the 1980s, but Joe had recently helped rewrite it to give family farmers tax relief. Chapter 12 is specific to family farmers and fisherman and allows them to avoid foreclosure and reorganize their operations or liquidate in a controlled manner.
Freedom from debt
Over the next 12 months we met several times with the couple and accompanied them to mediation with the bank. Jerry and Deb sold some acreage and more cattle as we began crafting a bankruptcy plan. The Chapter 12 plan was filed in late 2009 and called for complete liquidation. The rest of the farm was auctioned off.
“We sold the remaining ground, buildings, the construction equipment, farm equipment, household items and our home, all in one day,” Jerry says.
Through Chapter 12 Jerry and Deb were able to discharge $49,741 in 2009 federal and state income taxes for pre-petition sales and approximately $25,000 taxes for the post-petition sales of assets.
Today, Jerry and Deb are retired and living in northwest Arkansas, debt- and worry-free. “We would not have the life that we’re leading today if it weren’t for Joe,” Deb says.
If farm debt is becoming unmanageable for you, be proactive and reach out to us. Don’t wait – do it today.
At Ag & Business Legal Strategies, we want our clients to be honest with themselves and have a solid business plan. Our attorneys and financial strategist will help you create and execute that business plan, and, if necessary, assist you with the legal, tax, and practical aspects of debt restructuring or bankruptcy.
Don’t wait for the problems to become insurmountable. Connect with someone you can trust today, not tomorrow.
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Categories: Chapter 12, Testimonials
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