Of all the services we provide for farmers here at Ag & Business Legal Strategies, maybe the most important comes first: Helping you honestly assess your situation.

Earlier this month several articles and editorials came out of a meeting Arkansas farmers had with their Congressional delegation, requesting federal assistance to save their farms. This is far from the first news of the year indicating rising financial troubles for farmers stemming from several contributing factors: continuing low commodity prices, tariffs and other trade challenges impacting global demand for U.S. agricultural goods, higher input costs, and weather events.

Farm bankruptcies (Chapter 12) are up sharply in 2025:

• Data from the Administrative Office of U.S. Courts show in the first six months this year, 181 Chapter 12 bankruptcies were filed nationwide
• This is up 57% from the same period in 2024
• 181 is more than total filings in either 2022 or 2023
• In the entirety of 2024, 216 cases were filed

There is no shame in filing a bankruptcy if debt reorganization or other measures are no longer sufficient to address your farm’s issues. If fear is holding you back, keep in mind that bankruptcy doesn’t necessarily mean giving up your land or livelihood. Bankruptcy provides an opportunity to force a restructuring of farm debts if the farmer can satisfy the requirements of the bankruptcy code. And the sooner you act, the better your chances are of reorganizing instead of liquidating, or even avoiding bankruptcy altogether.

If you are not to the point of considering bankruptcy, but still have worries about your farm’s financial situation, it is better to face difficult decisions and take action now—not later. Indecision is a decision to allow others to make decisions for you. Waiting too long means your bank, your landlord, your vendors, and other people’s attorneys will be calling the shots for you. We want to help you determine your own path as much as possible.

How farm history matters

Even if your farm or ag business is thriving, it’s worth examining if this is a solid streak or simply a good year. For that reason, every farmer and their bookkeeper should set aside time to review the farm’s finances several times a year. Since harvest is underway and the end of the year will be here before we know it, this is as great a time as any!

• Review your farm’s financial statements for the past five years. If you don’t have financial statements, that’s a crisis warning sign in itself—but let’s presume you do. If you see negative cash flows for three of those years, that’s a financial warning sign. Or, if you do see historical positive cash flow but your current liabilities are at or exceeding current assets, that’s also a red flag of danger.

• Review your tax returns. If you owe taxes, you’ll want to work out a payment plan very soon. Not being able to pay taxes is always a financial warning sign; not getting them filed is like a loud klaxon.

• Ask: Are you rolling over vendor financing or input loans for next year, selling or pawning items just to stay afloat, seeking to refinance current debt by pledging land or machinery to make it intermediate or long-term debt, or taking out loans from questionable lenders? This includes “quick cash” from a payday loan or merchant cash advance (MCA) provider.

While quick cash seems an attractive option for desperate times because it’s immediately available and the creditor doesn’t require collateral, the tradeoff is immediate fees and, if not paid back within a short time, compounding interest beyond a normal person’s ability to repay. You can read more of our advice on MCA pitfalls, and better alternatives, here.

If you need help assessing your farm’s financial situation, Ag & Business Legal Strategies offers enterprise analysis. This examines the individual parts making up your farm or ag business to show you how each is contributing to profit and loss. Find out more about how this planning tool can save you lots of future time and trouble here.

(319) 363-1641

Cash isn’t necessarily financial health

Even if you have a positive bank balance, that should not be your only metric for financial stability. Cash on hand doesn’t always indicate profitability, which is tied to management decisions you’ve made that generate income, such as the return on new investment for crops or livestock production. If your positive balance is largely from non-production activities—say, the sale of capital assets (land or equipment, for instance), borrowing funds, or an inheritance payout—you didn’t generate profit.

This is important because profit has the possibility of being sustainable, or repeatable. Unless you’ve won a tremendous lottery or your last name is Buffett or Gates, you probably can’t rely on capital gains or a one-time payment as future income. This also applies to cash from refinancing or selling a capital asset, such as taking out a second mortgage. Borrowing and pledging intermediate or long-term assets to make your current situation positive only increases loan payments in future years, further decreasing your ability to cash-flow your operations.

We’ve written about profitability versus cash-on-hand in the blog before, which you can find here.

The only failure is avoidance

This has been a tough year on many farmers, not just in the upper Midwest. With lower commodity prices and higher costs, even if the past few years have been boom, you could be facing difficulties this year in paying all your creditors on time. Whether it’s rent, a bank loan repayment, or what you owe vendors, you need to know who has first security interest in your crops and other farm products so you can structure payments to creditors. In many instances, there will be more claims against the crops and other farm products than the cash from selling those assets.

This is another topic we tackled previously, about this time last year. You can read more about collateral, liens, the danger of selling collateral without authorization to pay debts, and how our attorneys can help with negotiations here. If the above is the situation you believe you’ll find yourself in post-harvest, it is time to evaluate your options NOW so you can be proactive in addressing deficits.

Ag & Business Legal Strategies has been helping farmers with this problem for many years. One of the reasons we started this blog was to help farmers and small business owners better understand not only the options available to address their financial and legal problems, but how imperative it is to seek assistance as soon as they realize they have a problem.

You may have heard that failure to prepare is preparing to fail. We say that failure to make a decision IS a decision—to let others decide for you. Farm debt not dealt with in a timely manner leads to consequences that can range from bad to catastrophic, including added default interest, legal action, seizure of property, and possibly imprisonment for farmers who sell collateral without authorization and do not pay the secured creditor. The earlier you act, the better chance you have to maintain control of decisions over your own future.

(319) 363-1641

At Ag & Business Legal Strategies, we want our clients to be honest with themselves and have a solid business plan. Our team 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, when it may be too late.