A Decade of Decisions for Better Debt Management
July 2026 isn’t just a notable birthday for the nation — it also happens to be the 10-year anniversary of when Ag & Business Legal Strategies founder Joe Peiffer opened his own firm specializing in farm and small business debt restructuring, bankruptcy, and related legal representation. And although the decision to leave his previous law firm and strike out on his own was made in relatively short order, coming up with the right name for this new business took more time. On July 1, 2016, Peiffer Law Office, P.C. opened its doors, but in October 2017 it was finally Ag & Business Legal Strategies… or, as a lot of folks refer to it, ABLS. “I worked on figuring out what I wanted my trade name to say,” Peiffer says of the wait. “I wanted people to know more about the firm by its name, as opposed to a person’s name. The ABLS name reflects what we work with here: ag people, business people, and how we help them strategize to figure out their best options, so we can empower them to pursue the best course of action.” If he had to boil down the ABLS mission to an elevator pitch? “We help farmers and small business owners get creditors off their back, preserve their assets, and minimize their taxes.” In 10 years, the mission hasn’t seen any changes, although technology has introduced some into the office. For example, Peiffer is looking into how to safely use artificial intelligence to help the attorneys quickly devise strategies for clients and conduct other research, while also protecting the firm’s and clients’ privacy. With Covid in 2020, ABLS had to learn how to meet with clients and courts at a distance — and keeping these remote options in place even now helps save on some time and travel expenses for both attorneys and clients. Fortunately at the time, ABLS had already switched over to using laptops instead of desktop computers, which made it easy to convert to a remote platform for delivery of legal services. Uncommon solutions A few years into ABLS’s tenure, Peiffer added the tagline: An Uncommon Law Firm. Sure, he wanted something to grab attention and differentiate his firm from others assisting farmers or small businesses. But it was also important that this hook be something true and meaningful. “We spend time learning a person’s business itself, whether it’s a farm or other kind of business,” he explains. “We don’t want to take a case to court until we have a plan of action in place.” As it turns out, each case is unique and there is rarely, if any, opportunity to use the same plan for two different clients. So “uncommon” captures the ABLS approach just about perfectly. An early case for the firm involved a client meeting to discuss options for restructuring farm debt in the millions of dollars. Early on, the farmer admitted to Peiffer he had forged grain contracts before handing them over to his accountant, who then unwittingly relied on those documents in preparing audited financials — which the bank used to decide to extend the farmer’s loan. There was, in fact, no grain to deliver. ABLS brought in an outside attorney to represent the farmer on potential criminal charges so all attorneys could negotiate with the bank to keep him out of prison. There have been many situations in which clients committed major mistakes before consulting with ABLS; not all could be considered criminal. But all must be faced head-on. “The first thing to do is to minimize the creditor’s loss, in order to maximize the client’s chances of staying out of jail where possible,” says Peiffer. “Our strategy is how to put the genie back in the bottle or at least minimize the loss that’s been caused by the mistake.” Debt restructuring and bankruptcy represent the main types of cases ABLS handles. Another significant portion of the caseload is tax planning for farmers looking into succession planning. Peiffer said a common situation is that a farmer transfers their land into a limited liability corporation, or LLC, for tax advantages and corporate liability shield. Unfortunately, when it comes time to bequeath the farm to the next generation, that LLC designation can eliminate the step-up in basis that individuals receive on the assets after death. (319) 363-1641 Advocacy matters too Representing clients is most of what Peiffer has done over the past decade with ABLS, but he’s also kept up with pushing for stronger federal and Iowa state legislation to protect farm and small business debtors — something he’s been passionate about since seeing how the 1980s Farm Crisis left so many producers ruined. These include stronger protections for farmers under Chapter 12, including deprioritizing federal tax liability that used to make it impossible to confirm a Chapter 12 plan of reorganization, as the secured creditor would get all the money while the IRS and state tax authorities had veto power over the confirmation. In many instances, since there was no money to pay the taxes, the farmer’s plan would not be confirmed and the case would be dismissed. He has also helped exempt IRAs from being liquidated to pay debt in bankruptcies. Too, Peiffer spearheaded a change of Iowa law that clarified how information about bankruptcies could be filed with court clerks as a bankruptcy transcript, which incurs a filing fee ($195) instead of paying for certified copies of the bankruptcy filings, then paying a recording fee ($5 a page, for 50 or more pages) so real estate titles can be easily transferred. In many cases, there is land in multiple counties that each require the bankruptcy data to be transferred — his legislative effort has saved many Iowans and their attorneys significant money and time. To do his legislative work, Peiffer has maintained relationships with elected officials in Congress and the state legislature, notably U.S. Senator Chuck Grassley. Just last month Iowa Governor Kim Reynolds signed into law the Uniform Assignment for Benefit
Closing the Loophole on Misapplied Loan Payments
Perhaps you pay for your auto, mortgage, home equity, equipment, and other loans each month through your bank’s online portal or app. In these cases, you select which account is receiving the transfer, and there’s a digital record showing where the payment was applied. Not every farmer does this, as many prefer to mail or hand-deliver payments to their bank or lender. And even tech-savvy producers run into situations where they have no contact with money going directly to their lender—for instance, the proceeds of an auction or sale that are sent directly to the lender. One of our clients was a farmer who sold some equipment at auction. Notably, he still had an active loan with his bank on one piece of equipment, which a family member had helped secure by signing a guaranty that he would assume the debt if the primary debtor—our client—could not pay. Rather than the farmer receiving the sale proceeds and turning them over to the bank, the auctioneer remitted directly to his bank. Instead of applying this payment as expected to the equipment loan, however, the bank put it toward another of our client’s loans. He learned about this a short time later when the family-member guarantor received a letter from the bank advising that a payment had been missed on the still-open equipment loan and that he, the guarantor, was financially responsible. We spoke with the bank and its attorney and, after some discussion, fortunately the bank agreed to reapply the auction proceeds to close out the equipment loan instead, and we did not need to take the matter to court. We were thankful our client had a good outcome, but it wasn’t guaranteed—and the entire problem could have easily been prevented. Be clear about intent To avoid this, we advise clients and auction sellers to write the specific loan number(s) on the payment checks to lenders or note it in correspondence before or with the payment being transmitted to the lender. It’s also a good idea for the client-debtor to contact the bank and explicitly state which loan should receive payment and then follow up to ensure it happened. The fact is, if you have more than one loan with a bank, credit union, or other lending institution and you don’t specify where a payment should be applied, under Iowa law the lender can apply it where the lender prefers. If Grandma signed a guaranty to help you buy a combine but you also have a mortgage only in your name and its payment deadline is looming, the bank may decide to allocate your payment to the mortgage. It is a larger loan, for one; and two, bank officials figure they can always go to your guarantor if further payment doesn’t materialize. They are going to look out for their financial interest first and foremost—especially if you the borrower are having money troubles If you can put your request for allocation of payment in writing, do so. Although oral contracts and instructions have the same weight as written ones, it’s much easier to point to something in writing than to try to resurrect a verbal discussion. If you must make a payment and instructions by phone, get an email address so you can follow up with a note reiterating where you want payment applied, with the loan number. You can also write a restrictive endorsement on a check made out to you, that you’re signing over to the lender. This just means on the endorsement line on the back where you would normally write, “For deposit only,” write, “To be applied to loan #…” and substitute your loan number for the ellipses. It’s a good idea to check if the lender prefers specific wording for this type of endorsement—they should interpret what you write reasonably, but it’s easier for everyone if you use the language that triggers the lender to do what you want. If you write a check for payment instead, include the loan number(s) in the Memo line. Remember: You have the right to direct how payments are applied to your loans. It’s your money, and while the lender might have its own preferences about how to apply payments, you have the right to control how your money is used. If a lender refuses to allocate a payment as you direct, you should seek legal advice if talking with the lender doesn’t resolve the issue. And if you are close to a financial cliff—facing mounting debt, about to fall behind on payments, or experiencing a shortfall of expected income—Ag & Business Legal Strategies can also help with the larger decision about whether to pursue debt restructuring or bankruptcy. Our attorneys can additionally assist with delving into your farm’s financial health with an enterprise analysis. As our Founding Attorney Joe Peiffer often says, a decision to do nothing is a decision to let others decide for you. Don’t wait until things go from bad to worse to seek legal counsel! (319) 393-1641 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.
Contract Provisions: When Business Dreams Turn to Nightmares
By Austin PeifferAssociate Attorney Recently I read two quotes that really struck me: “Nobody’s business plan includes bankruptcy,” from attorney Ferd Niemann and, from software entrepreneur and essayist Patrick McKenzie, “Contracts exist to be followed on very bad days.” They’re both accurate, of course. Nobody plans to start a business that ends up in bankruptcy, but many ventures end that way. If your farm or business ends up in bankruptcy, that’s a very bad day—but it’s also one of the main reasons contracts exist. Business owners, farmers included, would benefit from time thinking about these two quotes. Your business plan shouldn’t include bankruptcy, but your contingency plans should. It’s good to consider: I’m going to give this business my all, but what happens if, despite everything, it goes badly? Will I lose my house? Will I lose my investments? Will I be forced into bankruptcy myself? What if my contractual counter-party has a very bad day? Then, start looking at the contracts you’re signing for your business. Banks and other sophisticated parties already know the moving parts behind these two quotes well. That’s why their contracts contain pages of legalese. Many or even most borrowers don’t read that language, since they’re sure the business plan will work and none of the contract’s, “In the event of default,” language will be necessary. That language wasn’t inserted on a whim; the drafter (or the person the drafter copied it from) likely paid a lawyer to research and draft that provision—and it wasn’t out of a concern for that poor, starving lawyer’s income stream. It’s said that safety regulations are written in blood; contract provisions are written in red ink. Somewhere, at some time, someone had a bad day, a contract was enforced, and someone lost money. That contract provision exists to allocate the risk in such a situation and make sure that on certain kinds of bad days, one party or another loses money when the contract is enforced. And if someone else drafted the contract that you signed, you can guess how that risk is likely to be assigned. (319) 363-1641 Don’t let optimism interrupt reality Sometimes contractual obligations are overwhelmingly one-way. For a loan, the lender’s main obligation is to lend money, while the borrower will have numerous ongoing obligations: submitting reports, maintaining capital ratios, and, of course, making payments. Other contracts have more mutual ongoing obligations, such as an employment or supply contract. Those obligations on both sides matter. Many contracts are performed by their terms to the parties’ mutual satisfaction, and the default terms are never activated. With others, eventually, someone is going to have a very bad day. Whether it results in bankruptcy or something else, things will not go to plan, and sometimes the parties can’t reach a mutually agreeable resolution. That’s when those oft-neglected default provisions matter. Business owners, particularly farmers, are optimistic: Tomorrow will be better than today. Things will work out. This counter-party would never mistreat me. It makes sense—if you spend all your time worrying about what could go wrong, you’ll never have time to run your business and make money. But never worrying about the consequences, if things go wrong, is dangerous. Take some time to think through what kinds of very bad days might happen—whether to you or your contractual counter-party—and what would happen under the contract on those kinds of very bad days. Can you live with that? If not, think about how to address it. If you need help with the particulars of making a plan, or consulting on the legal provisions of a specific contract, Ag & Business Legal Strategies is here to help. An instructive case study One of our clients had a series of very bad days. They were involved in business ventures that went sour when economic fortunes changed, and their business partner filed bankruptcy. Many contracts were enforced against our client. Fortunately, they thought ahead to seek our legal advice, and planned how to protect themselves. Make no mistake—those days were very bad indeed for the client. They lost investments and business opportunities. But because they planned ahead and didn’t wait to seek legal assistance, the damage was isolated and limited compared to how it could have turned out. Too many people don’t think about very bad days until they’re already happening. When clients come to us early enough, we can do a lot more to prepare and position them for the best possible outcome. We can’t prevent all bad days from happening, and we can’t prevent painful contractual consequences when they do happen. But if we have time to act, we can often help minimize the extent of their consequences. Don’t face very bad days alone—reach out to us sooner than later, for your best outcome. (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.
Get Up to Speed: Potential Laws for You, Your Farm, Your Business
Call your Iowa State Senator by February 20 The bulk of our work at Ag & Business Legal Strategies is focused on helping farmers navigate complex court processes in bankruptcy, as well as laws and regulations that affect their livelihood. But our attorneys also devote time and expertise to working with state and federal legislators to try improving laws that govern these, as well. Ultimately, lawmakers serve you, the people. So from time to time, we like to update you on pending or potential legislation that could impact your daily life at some point so that you may reach out to your elected representative and share your opinion. File the first two items in this article under “Needs Attention NOW.” Updating for inflation in Iowa Last year we worked with an Iowa state lawmaker on draft legislation to better assist farmers and other small business owners seeking debt solutions by updating Iowa’s exemption laws for inflation. We explained what that means, and how it would help struggling parties protect more of their property, in this article. That legislation was introduced in the Iowa Senate last month and was assigned to a subcommittee of the Judiciary Committee. Not only would it bring up to date long-overlooked indexing, going forward it would require periodic indexing every three years. The subcommittee has recommended that the main Committee vote Senate File 2054 out to the full Senate for debate and consideration. Here is what’s needed: If the Judiciary Committee does not vote on this by February 20, 2026 (later this week, as of this publication), it will become much more difficult to get the bill to the Senate floor for a vote this year—if at all. If you’re in favor of fair protection for debtors while supporting economic recovery in the debt reorganization/bankruptcy process, contact your State Senator TODAY and ask that the Committee vote on S.F. 2054 by February 20. If you don’t know your Senator, find them here. ABCs of business liquidation In addition to farmers, we also advise small business owners. Section 681 of Iowa Code governs assignment for benefit of creditors, commonly referred to in legal circles as ABC. The concept has been around for centuries, crossing from common law of England to the U.S., and allows a failing business to close efficiently and the owner(s) to maintain credibility by liquidating assets to pay its creditors. This process happens largely outside of court supervision, saving court expenses and potential time delays related to oversight. Used efficiently, ABC lets a business owner transfer its assets to a neutral third party, whose job is to sell them and recover the best prices to pay creditors. When the state enacted its current ABC laws in Iowa Code Chapter 681 more than a century ago, it imposed significant court oversight and bonding requirements. The bond requirement has historically proven onerous and expensive, crippling this tool—in fact, the last case we can find using this was in 1949. Because ABC liquidation can be a more affordable alternative to bankruptcy when a business owner is not trying to reorganize to stay in business, we have been working with Iowa legislators to overhaul this state law. Senate File 2213 would do that, repealing Section 681 and replacing it with more modern, uniform language recently drafted and also under consideration in other states. UPDATE: The Governor signed the final bill, SF 2497, into law on June 2, 2026 As with the above-mentioned S.F. 2054, this bill has been recommended by the Judiciary Committee’s subcommittee for passage, so the full Committee can take it up for consideration. It too must be voted on by February 20, or it may be difficult-to-impossible for the full Senate to vote on this year. Contact your State Senator to request a Committee vote before February 20. Protect farmer safety, legal relief Recent approval of the use of dicamba herbicide by the U.S. Environmental Protection Agency (EPA) puts us in mind of an effort from the past two years, in Iowa, to nullify farmers’ rights to sue for relief if harmed by pesticides. In 2024 and 2025, the Iowa Senate voted twice to approve a bill that stated if the EPA approves registration of a pesticide under the federal Insecticide, Fungicide and Rodenticide Act, that “shall be sufficient to satisfy any requirements for a warning or labeling regarding health or safety” for its use. And twice, the Iowa House refused to make it law. Although we are not aware of any effort yet so far this year to revive the bill, it’s never a bad idea to get out ahead of potential action and let your legislators know that you are not in favor of taking away a farmer’s right to sue for injury from something they may be required to handle on a regular basis. Why it matters: Several years ago, Ag & Business Legal Strategies had a client who grew very sick and nearly died when he was mixing a pesticide and some landed on his skin. It turned out that in the 1980s this chemical had contained a “loud” dye so the user could more easily see if it was applied or spilled, and caused it to sting so the user could wash it off promptly. By the early 2000s, however, the dye and warning sting had been eliminated. The Eighth Circuit Court ruled this elimination a design defect that was an exception to how the EPA had registered the pesticide, and the farmer prevailed. EPA registration of a pesticide is predicated on how well it works for your crops, which has nothing to do with how safe it may be to use. Manufacturers and others will argue lawsuits raise the price or make approval a longer process. We ask: At what price do you really need those chemicals if they’re not going to be safe for everyday handling and exposure? Federal bankruptcy goals Next month, Ag & Business Legal Strategies Founding Attorney Joe Peiffer is headed to Washington, D.C.,
Our Strategies in the Headlines
By Joseph Peiffer, Founding Attorney Nearly 10 years ago, after 30 years of rural-focused practice with other firms, I founded Ag & Business Legal Strategies as a practice focused on advocating for the legal and financial interests of Iowa, Illinois, and now Missouri farmers and other small business owners facing debt restructuring or bankruptcy. This year, in the wake of more mainstream news focus on the farm economy, we at ABLS have seen a sharp increase in our efforts to provide news media with information and analysis about farm bankruptcy, financial planning, and more. Associate Attorney Austin Peiffer and I have provided multiple interviews over the past several months both to agricultural media—geared to a farmer and agribusiness audience—and to general news media that are trying to help the non-farming public understand more about agriculture. Here is a sampling of the 2025 news coverage featuring ABLS insights: We have more notable interviews to come, all with an eye toward keeping the public, as well as the farming and agribusiness communities, informed of financial and related legal factors affecting agriculture’s bottom line and future plans. If you are dealing with worry or uncertainty about debt, your financial health, or legal issues related to these, don’t wait to act—reach out for a discussion and plan of action NOW. Help yourself with the holiday gift of peace of mind! (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.
Don’t Fear the Creditor
Normally, here is where you might find an analogy comparing troubles in farming with some other life situation. And while that is a useful writing tool, the fact is that an analogy doesn’t always capture the real things we need to explain. And reality is that we are seeing a noticeable uptick in financial distress for farmers this year — not just in our own practice, but in farming overall. Corn and soybean prices are still down significantly from their 10-year high earlier this decade. Meanwhile, input costs for crop growers have not decreased at the same rate. Livestock overall is doing better in 2025, especially beef, but there are producers from these sectors also in the middle of bankruptcy proceedings. Stay on top of financial shifts If you planned to harvest corn at 200 bushels/acre and sell for $5/bushel, but you’re seeing only 180 bpa at $4.20, this is of course going to change your plans for the year. Continuing to hope things will improve as you harvest this month is a wonderful thing, but it will not make up lost income. That’s why you need to update your projections and plans as circumstances change. If projections show revenue will be short, there are decisions to make. Do you have enough in savings to pay creditors such as the bank, a landlord, laborers, suppliers, et cetera? If not, can you tap an additional income stream? Maybe you can sell your harvesting services to other growers in the area. And if you do this in Iowa, be sure to perfect a harvester’s lien with the state no later than 10 days after finishing the work, to ensure you are a priority to be paid timely, even if the farmer for whom you’re harvesting gets crossways with their bank). Or maybe you can pick up extra money hauling grain or livestock, driving a truck, packing silage, assisting with farm chores, or doing other temporary labor? Finding additional sources of income will protect the equity you’ve worked so hard to build over the years. If you’re still struggling to meet your obligations, you may be tempted to finance this short-term debt by rolling it into next year’s operating loan or tapping your land’s equity. But remember, these incur additional interest — like rolling a snowball uphill. At some point that debt snowball grows so large that it will roll back over you. Or, let’s say you’ve learned that you can sell grain for more than what you contracted with another party when you grew it. Or, you’re a month behind on rent and the landlord is pressuring you to pay when you also owe the bank a payment — the bank that holds collateral over your grain. These are both situations in which you may be tempted to seek a short-term solution to pay your most pressing debts, at the risk of legal action and penalties. When your farm production is some creditor’s collateral, you need to be very careful and seek sound legal advice. Don’t underestimate negotiation If you took out a bank loan or operating line of credit, that lender usually takes a security interest in every bushel, bale, hundredweight of milk, or animal you produce, meaning it has first dibs if you do not repay the loan on time. There are exceptions, such as if someone has an aforementioned harvester’s lien for doing work on your land or your landlord perfected a landlord’s lien with the state. We wrote about the pitfalls of selling collateral in a “rob Peter to pay Paul” debt-payoff scenario last fall, but it bears repeating: When your farm product is also collateral, you cannot unilaterally decide how to dispose of it or spend the proceeds. In addition to banks, harvesters, and landlords, certain vendors may also hold statutory liens on your crop or livestock. Here at Ag & Business Legal Strategies, we’ve handled many cases in which a farmer liquidated the collateral they had pledged to others as collateral, then needed our assistance when consequences inevitably happened. One farmer sold his grain under another family member’s name so he could use the proceeds to pay off creditors other than the one that had a security interest in the grain. Now he might not be able to discharge his debt to that creditor in a bankruptcy. Even more seriously, both he and the family member could be indicted for defrauding a financial institution — a federal felony — and possibly serve time in a federal penitentiary. In another case, the farmer sealed grain with the government’s Commodity Credit Corporation (CCC). Instead of delivering that grain to an elevator and repaying the sealed loan, he sold it elsewhere to pay bills. Not only did he have to repay the CCC, he also paid a fine and was barred from applying for another CCC sealed grain loan for two years. Yet another farmer created a limited liability corporation to sell his grain and tried to argue since that corporation didn’t owe any debts, it was free to sell the products. In all three of these cases, the collateral holders demanded their share; in fact, even after filing for bankruptcy, the third farmer will owe a six-figure debt that the bankruptcy court cannot discharge. Prepare, don’t react Our attorneys are certainly capable of providing representation for these kinds of cases — but we would rather help producers on the front end avoid fines, judgments, and possibly even jail time. If it seems to be difficult to pay your bank or other creditors in full this season, Ag & Business Legal Strategies can assist in reviewing your options and finding the best solution that does not risk jail time or non-discharged debts if a bankruptcy is necessary. If you have a close relationship with your bank and know you’ll be receiving later income — for example, crop-loss insurance — and you can convince your loan officer to wait, that’s great! If not, we can reach out to your
It’s Farmers Who Suffer the Shortage of Rural Attorneys
Even most attorneys enjoy a good lawyer joke. But there’s nothing funny about the shortage of access to legal representation for rural residents across the United States. And where people cannot find representation, they have a difficult time accessing justice. According to a 2020 survey by the American Bar Association (ABA), there are on average four attorneys per 1,000 people nationwide. If you have a suspicion this isn’t evenly distributed, you’d be right. Think about this: Nationwide, 40% of all counties (and county-equivalents) have less than one lawyer per 1,000 people. Fifty-four counties have no practicing attorneys at all. Earlier this year, while serving on a panel at Washburn University to discuss this shortage and brainstorm recruitment ideas, I met a fellow panelist from northwestern Kansas who is the only lawyer in her county other than its prosecuting attorney. Far from being happy about no competition, she believes the best thing for the county would be for at least one other attorney to set up practice locally. That way, she would not face so many situations in which she has to turn away potential clients because of conflicts of interest from already representing other parties involved. Also, local residents would not always need to travel to another county to hire a lawyer. Representation matters So, why are these “legal deserts” a problem—and why are they a particular obstacle for farmers and small-business owners? Regardless of where they live, everyone deserves access to legal representation and assistance when they need it. Most people hire a lawyer only once or twice in a lifetime for reasons such as divorce, writing a will, mediation, an injury claim, or bankruptcy. But if you’re running a farm or other business, occasions for need of legal assistance are more frequent than for a non-entrepreneur. A business owner works with contracts, business taxes, employees, customers, buyers and sellers, which means bringing or defending potential lawsuits or, sometimes, simply relying on an attorney to negotiate a difficult situation. While large companies typically have the resources to employ attorneys or retain the services of a big law firm, “the little guy” in need of less frequent legal services does not have a staff lawyer. For farmers especially, it is important to have access to lawyers who understand the business of farming, to help their client best navigate complex legal issues as they pertain to agriculture. This includes things like federal farm programs, farm leases and taxes, specialized contracts, ag finance agreements, incorporation papers, farm debt restructuring or bankruptcy, and more. Ag & Business Legal Strategies specializes in representing farmers—and other small-business owners—across Iowa as well as in Illinois and Missouri. Our lawyers and support staff understand the agricultural sector’s needs. We assist many clients beyond our office location, which means we rely on video conferencing in addition to some traveling for in-person meetings and court appearances. After all, the commute for a Zoom meeting is the same no matter where you live! Fortunately, courts accept electronic filing and our staff can assist clients with digitizing any paper documents as needed, allowing capable representation even for clients who live hours away. Need an ag attorney? Understanding the client When an attorney works with ABLS, if they do not already have an ag background like me (my dad was a farmer), I take them to different kinds of local farms so they can learn about cropping and livestock systems. I have even done this with some visiting lawyers. I think it’s critical for a lawyer to develop familiarity with the types of operations they will represent, plus I enjoy helping my colleagues learn the business of farming. Near ABLS’s eastern Iowa offices, legal deserts aren’t as severe as they are in western and northwestern Iowa, but there still aren’t as many attorneys as our state needs. For any profession to flourish somewhere, there must be younger people coming in to replace older professionals as they retire, sell the business, or pass away. But new graduates and other young lawyers in Iowa are moving to larger cities or out of state to work. This isn’t surprising, as many young people want access to more amenities, social networks, and career opportunities than they think rural areas may offer. I found satisfaction practicing law and raising a family in this area because, as a young attorney in the 1980s during the Farm Crisis, I saw where I could really make a difference advocating for farmers facing financial hardship and loss of their land. Even now, there are young attorneys who would like to live in rural areas, but a sense of purpose or attachment to family may not be enough incentive to someone carrying $200,000 in school loan debt, who can earn more in a large city. Some governments and organizations have instituted programs with added compensation for lawyers making even a short-term commitment to small towns. North and South Dakota each provide annual stipends for attorneys who agree to practice in qualifying counties through their Rural Attorney Recruitment Program. The attorney must live in the community for five years and be licensed to practice in that state. Each state’s legislators voted to approve the RARP, which is funded by various parties including benefited counties and state bar associations. The Illinois State Bar Association administers the Rural Practice Fellowship Program, which connects rural law firms looking for law clerks and associates with law students and lawyers interested in practicing in those areas. Associate Fellow Program lawyers are paid a one-time stipend of $5,000 when they begin working in the community, and another $5,000 if they remain for one year. Nebraska offers school loan repayment assistance through its Rural Practice Initiative—attorneys who go into private practice in a community of under 15,000 people can receive up to $6,000 yearly toward their loans, over seven years. In Colorado and Indiana, there is not compensation, but each has programs that match young attorneys or law students with mentors in rural law firms and courts, with an
What Overturning the Chevron Doctrine Means for Farmers
Last June, the U.S. Supreme Court made a groundbreaking decision in Loper Bright Enterprises v. Raimondo, overturning the long-standing Chevron Doctrine. But what exactly is the Chevron Doctrine, and why does its demise matter, especially to farmers? Let’s break it down. Doctrine’s origins The Chevron Doctrine originated from the 1984 Supreme Court case Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. In simple terms, it established a rule for how federal courts should handle cases involving federal agencies’ interpretations of laws passed by Congress. When a federal court reviewed a federal agency’s interpretation of a Congressional statute, the court would defer to the agency’s interpretation as long as it was deemed “permissible.” This deference applied even if the court might have interpreted the statute differently. The rationale behind the doctrine was straightforward: Congress often writes laws that are broad or vague precisely because it’s impossible for legislators to be experts in every field. Federal agencies, staffed by subject-matter experts, were tasked with filling in the knowledge gaps and implementing these laws. The Chevron Doctrine once gave agencies the flexibility to interpret and enforce statutes using their specialized knowledge. But fast-forward 40 years, and the political and judicial landscape has shifted significantly. Falling out of favor Several factors contributed to the downfall of the Chevron Doctrine: Opponents of the Chevron Doctrine argued it allowed agencies to overreach and expand their regulatory powers beyond what Congress intended. With Chevron overturned, these critics hope to see agency authority reined in, making it harder to implement new regulations. This approach relies heavily on Congress to take the lead in crafting detailed laws, but with federal legislators often mired in gridlock, the result is likely to be fewer new regulations—a win for anti-regulation advocates. What did Looper Bright do? In Loper Bright Enterprises v. Raimondo, the Supreme Court officially ended the Chevron Doctrine. The Court ruled that federal courts must now interpret statutes based solely on their own reading of the law, without giving deference to an agency’s interpretation. This decision shifts the balance of power. Courts, not agencies, will have the final say in how federal laws are interpreted and applied. While this may sound like a technical legal change, it has far-reaching implications for businesses, including those in the agricultural sector. Impact on farmers Federal regulations touch nearly every aspect of farming. From environmental practices to tax policies, the rules set by federal agencies can significantly impact farmers’ operations and bottom lines. Here’s how the Supreme Court’s decision could play out: New era for challenging regulations The end of the Chevron Doctrine creates opportunities for farmers to push back against regulations they view as burdensome or unfair. Without the doctrine’s deference, courts are more likely to scrutinize agency decisions, potentially giving farmers an edge in legal disputes. This also comes with risks, however. Agencies may become more cautious in issuing new regulations, leading to delays or uncertainty in areas including environmental protection and farm subsidies. Additionally, reliance on Congress to craft detailed, clear laws could lead to a regulatory vacuum, as legislative gridlock often prevents timely updates to outdated statutes. The Supreme Court’s decision marks a significant shift in how federal regulations are created and enforced. For farmers, this change presents both challenges and opportunities—while it may be easier to challenge unfavorable regulations in court, the lack of agency deference could also lead to greater uncertainty and fewer new rules tailored to the unique needs of the agricultural industry. Your legal advocates The end of Chevron deference is just the beginning of what promises to be a transformative era for agriculture and beyond. As this new legal landscape unfolds, farmers should stay informed and seek legal advice when navigating complex regulatory issues. Ag & Business Legal Strategies is your go-to resource for legal advice, with decades of combined experience among our attorneys specializing in farming and other small-business concerns. If you have a regulatory concern or questions, reach out to us sooner than later! or call (319) 363-1641 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. https://www.ablsonline.com/contact/
Crop Contractors: Reap the Benefits of Perfecting a Harvester’s Lien
You plan to do some custom harvesting for one or more farmers this fall, and while you haven’t necessarily worried about being paid for your work in the past, you’ve heard this may be a down year for farm income. How can you ensure you’re first in line to be paid? Iowa law provides a host of agricultural liens that give suppliers of goods and services to farmers statutory protection of payment for their efforts. We wrote about one of these back in the spring, the landlord’s lien. Others include the agricultural supply dealer’s lien, custom cattle feedlot lien, commodity production contract lien, veterinarian’s lien, lien for services of animals, and the harvester’s lien. This last one is especially important as we head into our major harvest season, but can be used at other times of the year by a contractor who assists a farmer with “baling, chopping, combining, cutting, husking, picking, shelling, stacking, threshing, or windrowing” a crop—which “includes, but is not limited to, corn, soybeans, hay, straw, and crops produced on trees, vines, or bushes.” A lien is a legal interest in property that secures repayment of a debt, including debt for services rendered. However, perfecting a lien slots you higher in the pecking order of parties to be paid if the market is down or harvest is low, and the farmer can’t (or won’t) pay all their debts. “Perfecting” a lien means filing a financing statement with the Iowa Secretary of State’s office. The perfection process Much like the landlord’s lien protects the landlord if the farmer doesn’t pay their land rent on time, the harvester’s lien becomes important if a harvester is not paid for their work within a reasonable time. Under Chapter 571 of Iowa Code, a properly perfected harvester’s lien has priority (must be paid before) over other security interests—such as a bank loan—in the harvested crop, even over a conflicting landlord’s lien. The harvester’s lien automatically becomes effective at the time services are rendered, but for it to do any good, it must be perfected with the Secretary of State’s office once work begins. It’s best to perfect the lien as soon as possible so it isn’t forgotten. The latest a financing statement can be filed to perfect a harvester’s lien is 10 days after the last date services are provided. To file a statement, just create a free account through the Secretary of State website, spend about 10 minutes filling out the UCC-1 form online, and pay a minor fee—it’s only about the price of lunch, but the peace of mind it provides is priceless even if it doesn’t become necessary to use the lien to get paid. Just be certain to get the debtor’s name correct—the name on a driver’s license controls if it’s an individual, while the name registered with the Secretary of State controls if it’s an entity (like a business). If this is incorrect, then the perfection is ineffective, and the harvester’s lien has little value. Protect yourself Even in a state of 3.2 million people, Iowa’s ag community feels pretty small, and in your own region those in farming probably know just about everyone else. It’s easy to feel guilty about filing any sort of paperwork that could be used in a potential legal dispute with neighbors and friends—even family—since you are inclined to trust them. Perfecting a lien, though, is less about accusing someone else of not meeting their obligations and more about protecting your own financial interests if the farmer faces circumstances beyond their control. If the farmer you did the work for goes through hard times, the bank might freeze their accounts and seize their crop proceeds as collateral to repay the bank debt, leaving you unpaid. Or, what if a terrible storm destroys the silo after crops are harvested but before they are sold, and you haven’t yet been paid? The bank will move to collect its operating-line repayment from any insurance paid to the farmer. Without a perfected lien, you might not be paid if there aren’t sufficient funds left over. Unfortunately, there are also times a farmer may try to renege on payment. A 2019 Iowa Court of Appeals case illustrates this. A father hired and paid by his farmer son to harvest his crops subcontracted the work out to a third-party custom harvester. When nearly 10 days had passed without payment, the harvester filed a financing statement against both father and son. After the son paid the harvester, the father sued the harvester, claiming he wasn’t properly a debtor and that the harvester’s lien had cost him income in commodity contracts. The appeals court, however, ruled that in acting as his son’s agent and contracting out the work, the father was a debtor for purposes of the lien and was co-responsible for ensuring payment to the harvester. We’re here to help If you have never perfected a harvester’s lien and need advice or assistance in doing so, reach out to Ag & Business Legal Strategies to learn more. Our attorneys can also assist with perfecting one or more of the many other agricultural liens designed to protect your interests—but these liens often have strict deadlines, and timely action is often the difference between success and failure! (319) 363-1641 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.
Know the Law—and What to Negotiate—When Deciding to Renew or Terminate a Farm Lease
Farm lease renewal time seems very far away, and in one sense, it is—half a year is a sizable stretch of months. But if you have any questions about renewing your lease, there isn’t much time at all. In Iowa, most farmland leases take effect on March 1. Such leases automatically renew year-to-year unless one of the parties expressly notifies the other six months in advance to terminate the contract. For instance, if you are renting acres you don’t want to plant in 2025, you need to provide notification to your landlord no later than September 1 this year (the same holds true for landlords wanting to terminate a lease). Iowa state law mandates a specific process by which this must be done. Some of the termination requirements include notification by certified mail, sent no later than the last day of August. This may vary, though, if the property is smaller than 40 acres or if the parties agree to terms in writing. Even oral leases must be terminated using this written process. In general, the receipt of a certified letter is rarely seen as good news and causes a certain amount of strain whether the recipient is landlord or tenant. And although this notification process is not technically difficult, I have long thought it should be the last step of modifying a lease, rather than the first. Farm lease negotiations I believe a better practice would be for the tenant and landlord to meet in person by the 4th of July each year to discuss their farm lease. Here it is appropriate to go over issues with the land, both good and bad. It is also a chance to clear the air if there are any misunderstandings. This meeting can cover many things, but some that should be reviewed annually include: Drainage issues. In many areas, farms are more productive with well-spaced and functioning tile. As roughly two-thirds of landlords are older than 70, their perspective on adequate farm tile may date back to clay tile and 100-foot spacing. Today it is not unusual to see spacing into 40 feet, since tile makes the crop. It is my experience that in recent times after CSR, the next question is about how much tile there is. Many tenants have the ability to either repair or replace tile, and often will donate the labor if their landlord is willing to pay for the tile. Maintenance. Landlords sometimes request that ditches, waterways, and terraces be mowed on a regular basis. Depending on the time of year, it may appear the tenant is not staying up with the landlord’s desires in this area, especially if the wishes are not spelled out in the lease. It may be a good idea to include this type of requirement, as well as frequency of maintenance. Rent. Many times landlords will hear at the “coffee shop” that going rent is far above what they are receiving. No one wants to believe they are being taken advantage of, so this can create a difficult situation. A tenant should be willing to share information about the general economic conditions in the farming industry, both in expenses and yield history. When operating returns drop rapidly, the tenant may want to move from a cash rent situation to a flex lease. Many flex leases allow a reasonable return to the landlord while capturing possible upsides of profitability. One issue with a flex lease is how to set the base and how to set the flex. Many flex leases are set such that the tenant takes all the risk in bad years and receives only a minimal benefit in good years. On the flex side, what may sound good on paper may not work in real life—an example is a lease that collects every month based on local elevator prices. This is a great lease, except that it requires someone to monitor prices on a monthly basis. The expectation is that the tenant will sell some grain each month to match this; unfortunately, this may not be possible or advisable, as the tenant may not know what their yield will be. A better method would be to set the base rent, then a flex based on the actual yield that can be verified at harvest. As an example: If the base is $250 and the flex is based on “30 percent of yield (multiplied by) harvest price (minus) the base paid,” this is easy to understand and calculate. Involvement of outside parties. In many situations the landlord is older and may ask one of their children to sit in on negotiations. While this is a great opportunity for the tenant to build a relationship with the next generation, one concern is that some offspring live far from the farm and often don’t keep up with the process. If this is the case, I advise making the most of the 30 minutes or so you have to educate them about what you do and what you need. Some of the sadder farm situations I have seen are when a long-term neighbor or offspring has been renting a farm for many years and the landlord has not adjusted the rent because they don’t need the money or they just haven’t addressed the matter. To the farm manager or child suddenly assisting the landlord, this looks like the tenant has been taking advantage of their boss or relative. These situations rarely turn out well for a tenant, so keeping rent reasonably close to market value is important (refer to my above comment about “coffee shop” talk). Sensitive information. Many leases now require that a tenant provide copies of invoices showing the amount of fertilizer they put on the field, as well as periodic soil tests. Some farmers don’t believe this is an appropriate request—but if it is in the lease, it should either be adhered to or negotiated out of the lease. Often, split leases require the tenant to provide sales locations of their
Right-to-Repair: Equipment is Only Yours Until it Breaks Down
It’s spring planting season, and every farmer is eager to get into the field as soon as conditions allow. No one wants to watch their neighbors planting acre after acre while they’re stuck in the machine shed with broken equipment. With the increased technological sophistication of farm equipment, however, repairs are no longer as simple as a few wrench twists or some baling wire. Can you or your local independent mechanic fix your equipment yourself, or is your only option to go to the dealer’s service center to get it repaired on the service center’s timeline—and at whatever price it may choose? The answer to that question might depend on right-to-repair. The right-to-repair movement in farming seeks to ensure that farmers and independent mechanics have access to the parts, tools, software, and information they need to repair farm equipment. It’s one aspect of the broader right-to-repair movement that spans from cars (where strong right-to-repair laws already exist) to consumer technology such as phones and tablets. Especially given the increased technological complexity of modern farm equipment, without access to the right parts, tools, software, and information, it can be impossible to fix a newer tractor or other piece of farm equipment. This rubs self-sufficient farmers the wrong way. If you’re handy and used to fixing things yourself, or if you have a favorite local mechanic who treats you right, the idea that only the dealer is able to fix your equipment is revolting. It’s your equipment—but if you can’t repair or modify it to suit your needs, then it doesn’t quite feel like it’s your equipment. While manufacturers certainly enjoy the profits they earn from repairs, they tout safety, sustainability, and innovation as justifiable reasons to restrict repair rights. Of course, these same issues could have been raised about farmers’ ability to repair and modify their equipment before manufacturers began restricting repairability, but manufacturers only raised these arguments after proprietary technology gave them the ability to impose these restrictions. Cars have similar safety, sustainability, and innovation concerns as farm equipment, but car right-to-repair laws have not resulted in unsafe, polluting cars harming society while innovation in new vehicles stagnates. In short, manufacturers’ arguments against farm right-to-repair appear to be pretense for maintaining profitable monopolies on repair services. Legislation vs Memorandums Farmers and their allies are pursuing improvements in farm right-to-repair through several avenues. In 2023 more than 30 state legislatures, including Iowa’s, considered right-to-repair legislation (some including and some excluding farm equipment), but right-to-repair legislation was only enacted in Colorado. On the national level, Congress considered the Fair Repair Act in 2021, but it did not pass, highlighting the difficulties in the ongoing struggle against repair monopolies. Outside of legislation, the Farm Bureau has negotiated memorandums of understanding (MOUs) with five of the largest equipment manufacturers to give farmers and independent repair shops access to information, tools, and parts to enable them to repair those manufacturers’ equipment and find equipment breakdown solutions for farmers. Those MOUs came into effect at various dates in 2023, and it is not yet clear what effect, if any, they have had on breaking the manufacturers’ repair monopolies. Finally, several farmers have sued John Deere in federal court, claiming its restrictions on right-to-repair violate federal antitrust laws. Those cases are part of multi-district litigation that has been in progress for nearly two years now, and resolution does not appear imminent. What’s a Farmer to Do? First, get your spring planting done! If you run into breakdowns, have right-to-repair in the back of your mind as you get your equipment back up and running. Would this have been cheaper, easier, or faster if I or my mechanic had better access to proprietary parts, tools, software, and information? When you have a chance, test out the Farm Bureau’s MOUs. Can you actually get the parts, tools, software, and information to allow you to repair your own equipment if you ask these manufacturers? Can your local mechanic? More generally, contact your legislative representatives, both state and federal, and encourage them to support right-to-repair laws and break repair monopolies. Without legislation, progress on right-to-repair depends on the continued goodwill and cooperation of equipment manufacturers. At any time those that have signed MOUs could withdraw from them and stop cooperating, or even stop complying with the MOUs without withdrawing from them. The MOUs also do not bind any manufacturer that has not signed one. Only state or federal legislation can fully protect your right-to-repair. If you have the opportunity to test one or more of the Farm Bureau’s MOU agreements, we would like to know the outcome of your experience! Please call or text our office, or drop us an email through our website link below. (We will keep your identity anonymous, if you wish, should we publish a later update to this blog entry and cite your account in it.) 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.
Landlord’s Liens: Cheap, Easy, but Time-Critical Insurance
Iowa, being an agricultural state, has many ag-specific laws on the books, from increased protections for farmers facing foreclosure to laws barring restrictions on agricultural experiences like farm-to-table dining. One important but underused protection for ag industry participants is Iowa’s array of agricultural liens. Today we’ll discuss one of those liens: the landlord’s lien. What’s a Lien? Many people have an intuitive understanding of liens even if they might not know the terminology or the underlying legal mechanics. A lien is simply a legal interest in property that secures repayment of a debt. If you bought a car and financed it the lender would put its name on the title to note its lien. If you buy a house your mortgage is a lien on it that gives the bank the right to sell your house to pay the debt if you don’t make the payments. A landlord’s lien is in the same vein: it gives an agricultural landlord an interest in the crops grown on the property or other items stored on the property (equipment, livestock, grain stored in bins) to secure payment of the rent. What Good Does a Landlord’s Lien Do for Me? A landlord’s lien protects the landlord in case the tenant is unwilling or unable to pay the rent when it’s due. Clearly if all the rent is due up front a landlord’s lien isn’t necessary, but if say half the rent is due in the fall, or it’s a crop share lease, or it’s a flex lease with payments due later, or in just about any other scenario, a landlord’s lien is a best practice. If the rent isn’t paid when due then the landlord can seize and sell the crop or other collateral, sell it, and get paid, rather than being forced to sue and then try to collect. Even better though, an Iowa landlord’s lien has priority over (aka gets paid before) most other liens, most often the bank’s blanket lien on the tenant’s crop, equipment, and other collateral. If there’s not enough money to pay everyone a landlord’s lien helps a landlord ensure they won’t be left out in the cold. I was involved in a case where a farmer was unable to pay the rent and there were two creditors with security interests (another type of lien) in the crop. Had the landlord perfected their landlord’s lien the landlord would have had the senior lien on the farmer’s crop and would have been paid in full. Since that didn’t happen the landlord had to accept the small payment that the other two creditors chose to offer. Not perfecting their landlord’s lien cost this landlord tens of thousands of dollars. Okay, You’ve Convinced Me, I Need a Landlord’s Lien. How Do I Get One? If you’re an Iowa ag landlord then you automatically have a landlord’s lien. The statute creates this along with the landlord-tenant relationship. However, that lien lacks most of its power (including the power to jump to the head of the priority line) unless it is perfected in a timely manner. “Perfection” sounds like a fancy legal maneuver, but it’s really a simple matter of filing a short form with the Iowa Secretary of State and paying a fee of $25 or less. Iowa State University’s Center for Agricultural Law and Taxation has an excellent blog post on perfecting landlord’s liens that includes the steps for doing it. If you want more help Ag & Business Legal Strategies can perfect your lien for you or teach you how to do it yourself. However, don’t wait! Under the law you only have 20 days after the tenant takes possession of the premises to perfect the lien otherwise it loses its superpriority status. For crop leases where the tenant takes possession on March 1 that means perfecting no later than March 21. You have to be on the ball to get the most advantage out of your landlord’s lien. I Trust My Tenant & I Don’t Want to Ruin Our Good Relationship. Landlord-tenant relationships are often long-standing and based on mutual trust. You may have every reason to believe your tenant will make the fall rent payment. Even then, it’s still wise to perfect your landlord’s lien because the decision to pay you might not be within your tenant’s control. If the tenant goes through hard times the bank might freeze the tenant’s bank accounts and line of credit and take all the tenant’s revenues, leaving you hung out to dry. Maybe your tenant dies and their heirs aren’t as trustworthy. Maybe they get sick. Who knows what could happen? If you perfect the lien but don’t need it you can always release it or decline to enforce it, but if you need it but didn’t prefect it then you’re out of luck. Perhaps the best way to explain it to the tenant is that the landlord’s lien isn’t a sign that you don’t trust them, it’s just taking the necessary steps to legally protect your interests in case something goes wrong, and that it’s more about protecting you from other people (or banks) than protecting you from the tenant. If the bank’s done its homework and protected itself but you as the landlord haven’t, the bank will win and you will lose, and I think all landlords and almost all tenants would prefer the landlord to win over the bank. What Should I Do Next? Once your tenant takes possession go ahead and file your landlord’s lien. If you’re not sure about how to do it or have questions contact Ag & Business Legal Strategies ASAP. We can teach you how to do it or do it for you. However, the clock is ticking, so don’t delay! If you missed the deadline it’s still worth it to perfect your landlord’s lien after that, you just don’t get the superpriority discussed. And even if you’re not a landlord, if you’re in the ag sector there’s a good chance Iowa
The Limits of FDIC Insurance and Iowa’s Grain Indemnity Fund
Where’s Your Wealth Stored and How Safe Is It? Banks and grain elevators are the pillars of many rural communities. It can seem like they’ve always been there and will always be there. Some grain farmers might have more money in grain at the elevator than they do in the bank. Regardless, the failure of either of those institutions could devastate a family farmer. The protections available to wealth stored in banks and grain elevators vary, and few farmers have experience with either. Silicon Valley Bank Closure and FDIC Insurance The Federal Deposit Insurance Corporation, or FDIC, closed Silicon Valley Bank (SVB) in March 2023. While this closure may have been a passing headline for many Iowa farmers, it had significant implications for people with deposits there. Many of SVB’s customers had deposits that greatly exceeded the FDIC’s $250,000 deposit insurance limit. There were concerns that these depositors’ losses might cause knock-on effects throughout the financial system, disrupting or devastating businesses’ finances. To address this, the FDIC announced it would insure all of SVB’s deposits, even those above the $250,000 limit. To replenish the FDIC’s deposit insurance fund after this and other recent bank failures, the FDIC has announced a special assessment on banks, with larger banks paying more. Even though the FDIC bailed SVB’s uninsured depositors, there’s no guarantee it will do so again. Recent bank failures like SVB, First Republic Bank, and Signature Bank, and concerns about future insurance, have increased interest in managing deposit risk. Many Iowa banks help their customers manage this risk by titling accounts in different names to maximize FDIC insurance coverage. These banks help their customers understand their options, make informed decisions, define their strategies, and mitigate their risks. Global Processing, Inc. Bankruptcy and the Iowa Grain Indemnity Fund Global Processing, Inc. filed bankruptcy in October 2022 and surrendered its grain dealer licenses. While this may have been a passing headline for most of the country, it had significant implications for farmers in Iowa, Illinois, Nebraska, and Minnesota who had sold soybeans to it. Unlike how the FDIC insures banks, there is no nationwide insurance scheme to protect unpaid farmers who sold grain to failed elevators. Instead, in 1986 Iowa created its grain indemnity fund to help protect farmers who lose money from grain dealer failures. Farmers who sold to Global Processing submitted $3.6 million in indemnity claims; however, this fund comes with some significant limitations: The indemnity fund rejected $1.5 million in Global Processing claims. One farmer submitted $800,000 in claims, but only received $60,000. Farmers who took losses are not completely out of luck, but like uninsured depositors of a failed bank, they must wait for the elevator’s assets to be liquidated before they can recover on their remaining claims. Usually those recoveries are 50% or less. The indemnity fund paid farmers $2.1 million for Global Processing claims. This depleted the indemnity fund, like bank payouts depleted the FDIC’s deposit insurance fund. The indemnity fund statute, though, doesn’t allow for the cost of replenishing this fund to be weighted toward the bigger dealers or producers. Funding for the indemnity program comes from assessments on grain dealers. These assessments are levied when the fund drops below a prescribed level, and no assessments have been levied since 1989. The fund now has only ~$250,000 — far below that threshold — so next year, dealers will pay a 0.014¢/bu fee on all purchased grain (this cannot be passed on to sellers), a 0.025¢/bu fee on purchased grain (this may be passed on to sellers), and a warehouse operator fee. These fees aren’t enormous, but they apply across the board, from large grain dealers to small, and even though elevators cannot directly pass the 0.014¢ fee on to sellers (and might not choose to directly pass on the 0.025¢ fee), ultimately farmers or elevator owners will bear these increased operating costs. The Iowa Capital Dispatch has reported the fee is being reinstated on September 1 this year and that the fund has a balance of approximately $380,000. You can read more details of this news story here: https://iowacapitaldispatch.com/2023/08/30/state-grain-fees-will-resume-this-week-to-replenish-indemnity-fund/ Takeaways for Farmers to Protect their Wealth While no financial loss is convenient, significant losses can greatly impact a farmer’s lifestyle, whether they are from a failed bank or a failed grain elevator. Here are some key points farmers should consider to protect their wealth: 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. Contact us here!
Reminder: It’s Time for Iowa Farmers to Send Farm Lease Termination Notices
Harvest is fast approaching, but before breaking out the combine, review your farm leases so you can decide whether to terminate them before it’s too late. Under Iowa Code § 562.6, a farm lease continues beyond the agreed term for the following crop year on the same terms and conditions as the original lease unless either party provides written termination notice on or before September 1. In short, terminate before September 1 or the lease is renewed on the same terms. Even after a termination notice the same landlord and tenant might end up working together for the coming season, but a termination signals that the terminating party wants to at least renegotiate the relationship, if not terminate the relationship completely. While landlords may terminate more frequently, the statute applies equally to tenants. How to Send a Termination Notice If you decide not to renew a farm lease, Iowa Code § 562.7 prescribes the three acceptable ways to send the Notice of Termination: The easiest of these is certified mail, and that’s how most termination notices are sent. So, leave the combine in the shed for another hour, review your farm leases, decide whether you need to terminate any for next year, and send termination notices for any farm leases you want to terminate. If you don’t you could be stuck with an unprofitable lease for another year! For more information on farm leases including a sample termination notice form, see the Iowa State University Center for Agricultural Law & Taxation’s blog post on the topic. You can read Iowa Code § 562.7 here.
Choice of Business Entity for Farmers
The choice of business entity for a farm is an important decision that can either protect farm owners and their families from the risks inherent in the farming enterprise or expose them to those risks. Farmers employ various forms of business entity, and the choice varies greatly between types of farms and their sizes. Many are operated as sole proprietorships and general partnerships, but these formations pose great risks to their owners. However, Iowa laws restricting corporate farm ownership makes it harder for corporate entities (corporations, LLCs, limited partnerships, etc.) to own or lease farmland. What’s a farmer to do? Thankfully, many of those restrictions can be avoided with appropriate legal advice, and in almost all cases farmers should be able to take advantage of the benefits of corporate entities in running their farming operations. Sole Proprietorships and General Partnerships Sole proprietorships are the simplest business entity to “create.” They consist of one owner, and it is the default business entity if a farmer does not file to create another kind. In fact, you automatically become a sole proprietor if you own your own farm and are not on another person’s payroll. There may be some licenses and permits required such as a tax certificate or a filing required for a farmer wanting to name their business something different than their own name, but generally, a sole proprietorship has fewer hoops to jump through to start business. Unfortunately, this simplicity comes at a cost, as there are significant risks associated with operating as a sole proprietorship. As sole proprietor, your personal assets are not protected from liabilities deriving from business operations. Because the farmer, as a sole proprietor, is not legally distinct from the business, the assets of the farmer can be used to cover any liabilities and debts. While exemptions will protect some assets, if a farm starts facing financial issues, there is a significant threat that creditors will come after the farmer’s personal assets. These dangers heighten under a general partnership. Under a general partnership, the personal assets of all partners are subject to liability. Moreover, the actions of a partner can create liability for another partner, and every partner can enter into business arrangements that are binding on the whole partnership. Not only is each partner subject to liability as an individual, but each partner can be held fully responsible for the full amount of the partnership’s debt. This creates a situation where one of the partners may be compelled to sue another partner to recover their share of the debt. The partnership can alleviate some of these potential issues by creating a detailed partnership agreement outlining the terms of the relationship, but even with such a written agreement, an alternative business structure would provide more protection. Moreover, a general partnership can be formed unintentionally—all it takes is two people going into business together seeking a profit. If one such partner doesn’t realize they’ve entered into a general partnership, they could face unexpected liability for another partner’s conduct on behalf of the partnership. “One advantage of a general partnership is that the business may be able to circumvent payment limitations under certain federal farm programs, since each general partner may qualify to receive payments up to the limit instead of only being eligible for one payment as an entity. However, this doesn’t mean it’s necessary to accept the personal debt risk of a general partnership to obtain this benefit; limited liability entities can serve as general partners, giving the best of both worlds—eligibility for multiple federal farm program payments plus limited liability to protect your assets.” Limited Liability Company The LLC combines the flexibility and favorable tax treatment of a sole proprietorship with the asset protection of a corporation. Understandably, it is a popular choice for a business entity. Farming, like any business, can be unpredictable, and ventures often fail. The LLC provides farmers with greater protection. If the creditors come after the LLC, they can only get LLC assets. This is because when an LLC is created, the LLC becomes its own distinct legal entity. This separation between the owners and the LLC protects a farmer’s personal assets because the farm’s assets are distinct from the farmer’s. Put simply, the risk of the farmer is limited to the amount the farmer invests in the LLC but not more than that. Because the LLC is a separate entity, the farmer must actually separate the assets of the farm from personal assets. In practice, this requires that farmers create separate bank accounts and work to capitalize their farm. LLCs also give farmers more flexibility when operating their business. LLCs offer broad discretion to owners when deciding who has control in making big decisions for the business. For example, if multiple people are farming together, voting rights in the LLC could be based on an farmers’ percentage of ownership, or each farmer could have one vote regardless of share. Additionally, LLCs do not require that farmers divide profits and losses in proportion with the share of the business owned by each farmer. In a general partnership, if there are two equal partners, then profits and losses would be split equally between them. However, with LLCs, this arrangement can be made however the owners choose. Lastly, LLCs lack the formalities of other business entities like corporations. LLCs do not require positions such as President or Treasurer (though an LLC’s members are free to create such positions), and LLCs do not have to establish annual meetings with elected members. Many farms are owned by a single farmer or very few farmers, so the formalities can be more of an inconvenience than useful guidelines for business governance. Despite the advantages of an LLC, there is a risk of automatic dissolution of an LLC if the LLC does not report its filings on time or even if there is some change in the business’s structure as the result of a death of an owner or a merger. This does not mean that
Collection of Lawsuit Attorney Fees in Iowa
Attorneys’ fees can be significantly expensive for a party in a lawsuit, and often those fees cannot be recovered by the plaintiff even after winning a judgment. Many parties to a transaction will wisely include a provision in their contract stating that if a judgment is recovered with respect to the agreement then the prevailing party can seek attorneys’ fees. In Iowa, “[w]hen a judgment is recovered upon a written contract containing an agreement to pay an attorney fee, the court shall allow and tax as a part of the costs a reasonable attorney fee to be determined by the court.” Iowa Code § 625.22 (emphasis added). However, before a court can even consider the reasonableness of attorneys’ fees, the party requesting the fees must abide by certain procedural requirements. Affidavit Requirement In Iowa, to recover attorneys’ fees, a party must abide by a procedural rule requiring a signed affidavit. “The attorney fee … shall not be taxed in any case unless it appears by affidavit of the attorney that there is not and has not been an agreement between the attorney and the attorney’s client or any other person, express or implied, for any division or sharing of the fee to be taxed.” Iowa Code § 625.24. Put simply, no affidavit=no fee. However, “[t]his limitation does not apply to a practicing attorney engaged with the attorney as an attorney in the cause.” Id. So, attorneys can share fees with other attorneys that are working with them. “The affidavit shall be filed prior to any attorney fees being taxed,” and “[w]hen fees are taxed, they shall be only in favor of a regular attorney and as compensation for services actually rendered in the action.” Id.. The affidavit requirement used to apply at the commencement of the case, but in 1985 it was amended to comport with the notice pleading system.) Clearly, the purpose of the is affidavit is to have attorneys attest to the fact that they did not engage in a fee-sharing arrangement. Sometimes though, attorneys will neglect to file the affidavit even though they most likely did not engage in an unlawful fee-sharing arrangement. The court has then had to decide whether attorney fees could be recovered at all—whether there are any exceptions to this rule. Waiver of Affidavit Iowa courts have dealt with many different cases where attorneys neglected to sign the affidavit, but have been reluctant to carve out any exceptions. Federal courts applying Iowa law have appropriately been similarly reluctant. For example, in Nutrena Mills, Inc. v. Yoder, the court held that the affidavit requirement applies where a party seeks attorneys’ fees from an action in a federal court acting in diversity. 187 F. Supp. 415, 429 (N.D. Iowa 1960). However, state courts have found one notable exception to § 625.24. In Van Sloan v. Agan Bros., Inc., 778 N.W.2d 174 (Iowa 2010) the Iowa Supreme Court discussed whether the issue of failing to sign the affidavit in accordance with § 625.24 needs to be raised in a lower court before it can be raised on appeal. In this case, the court recognized that normally failure to raise an issue in the lower courts would preclude a party from being able to raise it on appeal. However, the court had previously recognized that failure to object to an opposing party’s failure to sign the affidavit required under § 625.24 did not completely waive an objection to paying attorney fees, and the issue could be addressed on appeal. The Iowa Supreme Court questioned whether the weight of the court’s precedential authority allowing parties to raise the affidavit issue at any time still applied given its recent cases distinguishing subject matter jurisdiction from authority. The court explained that “[t]he distinction is critical because a court’s lack of authority to hear a particular matter may be waived if it is not raised below, whereas an absence of subject matter jurisdiction may be raised by the parties at any time.” Van Sloan, 778 N.W.2d at 183. The court looked to the language and the historical development of the statute to determine that the affidavit issue is an issue of authority and should have been raised at the lower court. Thus, the claim was waived, and attorneys’ fees were awarded despite the failure to sign the affidavit. A party may also be entitled to attorney fees incurred on appeal. Beckman v. Kitchen, 599 N.W.2d 699, 702 (Iowa 1999). However, in Van Sloan the court determined that the party requesting the attorneys’ fees must sign the affidavit again for those fees incurred on appeal. See Van Sloan, 778 N.W.2d at 183–84. Reasonableness Recall that the attorney fee must be “reasonable.” The courts determine a reasonable rate using the lodestar approach by multiplying the reasonable number of hours spent by the reasonable hourly rate. It is the duty of the party requesting the fees to prove that the services were reasonable and necessary. Determining a reasonable number of hours spent and a reasonable hourly rate defies a mechanistic approach and requires the court to make “[d]etailed findings of fact.” Dutcher v. Randall Foods, 546 N.W.2d 889, 897 (Iowa 1996). Courts will often dive into the billing records of attorneys and compare them to other similar cases. This can be a difficult process for courts, and the discretion leads to varying results with different judges and cases; but courts are experienced carrying out this duty. Conclusion Recovery of attorneys’ fees can be a contentious and expensive issue for parties to dispute. In Iowa, to pin attorneys’ fees on an opposing party based on a contract, the requesting party must file an affidavit stating that the attorneys are not engaged in a fee-sharing arrangement with their client or anyone else, and the fees must be reasonable as determined by a court. Failing to meet these simple requirements can nullify even otherwise-meritorious claim for attorney fees. Sources: Iowa Code § 625.22 Iowa Code § 625.24 Dutcher v. Randall Foods, 546 N.W.2d 889 (Iowa 1996). Nutrena Mills, Inc. v. Yoder, 187 F.
Creditor Attorney Fees in Bankruptcy
In bankruptcy, parties fight over a limited pool of assets while fees diminish what remains in the estate. While most creditors are responsible for paying their own attorneys’ fees, oversecured creditors are entitled to attorney fees from the debtor pursuant to 11 U.S.C. § 506(b) which states: To the extent that an allowed secured claim is secured by property the value of which, after any recovery under subsection (c) of this section, is greater than the amount of such claim, there shall be allowed to the holder of such claim … any reasonable fees … provided for under the agreement or State statute under which such claim arose. 11 U.S.C. § 506(b) https://www.law.cornell.edu/uscode/text/11/506 Section 506(b) establishes three rules applied when the bankruptcy court looks at creditor attorney fees. “To recover attorneys’ fees, a creditor must establish that: (1) it is oversecured in excess of the fees requested, (2) the fees are reasonable; and (3) the agreement giving rise to the claim provides for attorneys’ fees.” In re White, 260 B.R. 870, 880 (B.A.P. 8th Cir. 2001). The most fact-intensive inquiry of this three-pronged test is the reasonableness prong, requiring the court to consider a variety of factors specific to the case at bar that would justify the proposed creditor attorneys’ fees. In re Kurtenbach In re Kurtenbach, a 2020 case in the Northern District of Iowa, presented the bankruptcy court with the issue of whether a creditor’s attorney fees were reasonable in this complicated Chapter 12 case. The court considered factors such as the complexity of the case, the hourly rates charged, whether the services were necessary for the client, whether the attorneys efficiently and competently provided their services, whether billing judgment was exercised, the results obtained, and amounts charged in similar cases. Facts Farm Credit, the oversecured creditor in this case, sought creditor attorneys’ fees amounting to $219,447.67. The debtor objected to these fees, admitting that Farm Credit was eligible for attorneys’ fees under § 506(b) but claiming the amount requested was unreasonable. Farm Credit responded by claiming that the complex case warranted a greater amount of work, especially because of the debtor’s multiple plan proposals. Through the course of the Chapter 12 case, there were four different bankruptcy plans proposed by the debtor. Farm Credit objected to each of them. Additionally, the proposed plans were “a bit out of the ordinary.” Then, confirmation hearings on these proposed plans were rescheduled repeatedly. Ultimately, the case presented far more work for debtor’s counsel and Farm Credit’s counsel than the average Chapter 12 case. Discussion The courts have broad discussion to review attorney fee applications, including those from creditors’ attorneys. The court first looked at the complexity of the case and acknowledged that the case’s complexity supported a claim for a large fee but also said that complexity is not dispositive. The court also recognized that the hourly rate charged by Farm Credit’s attorneys was reasonable. The court then looked to whether the fees were necessary to protect Farm Credit’s interest. Farm Credit sought to recover fees for a motion for relief of stay, and the court determined that this was not necessary for the interests of Farm Credit because Farm Credit’s status as an oversecured creditor made relief of stay highly unlikely. Thus, the court reduced $6,000 worth of fees for services relating to the motion for relief of stay. The bulk of the court’s discussion related to the efficiency of the services and whether billing judgment was exercised. The court found multiple instances of Farm Credit’s attorneys billing for services that did not meet the efficiency requirement. Farm Credit’s attorneys billed for reviewing documents, exhibits, and witness lists each time the debtor proposed a new plan, even though these items were essentially the same for each plan proposal. While the court admitted that there may be additional services that would need to be billed for each proposed plan, the court found that the extent of services rendered seemed far too great in many instances. Moreover, when the court Farm Credit’s attorneys exercised billing judgment, it found multiple instances of duplicative services. The court found examples of attorneys billing for reading, reviewing, drafting, and revising the same documents multiple times. Although the court recognized that diligence is necessary for good lawyering, the court pointed out that diligence must be reasonable. In this case that diligence was not reasonable. Because Farm Credit failed to eliminate duplicative billing entries or explain the confusion surrounding it, the court had to adjust fees accordingly. The court recognized that Farm Credit’s attorneys had produced favorable results for their clients, which weighed in favor of a fee award, and then turned to whether the fees Farm Credit sought could be compared to any similar cases. The court pointed out that the case was unique, and the best comparison would be to compare the fees charged by Farm Credit’s attorneys to the fees charged by debtor’s counsel in this case. This point presents an interesting observation that appears to undergird the opinion. Debtor’s counsel presented the argument that Farm Credit’s attorneys’ fees should not exceed the estimated $160,000 of fees requested by debtor’s counsel in this case. The court recognized that debtor’s counsel’s fee requests were familiar to the court and the court consistently approved them. The court further states, “Debtor’s counsel’s fees provide at least a general benchmark for the amount and value of services required in this unusual case.” The court does not appear to say that counsel for an oversecured creditor can never charge more than debtor’s counsel, but rather, in this case, the court could appropriately compare fees between the oversecured creditor’s counsel and debtor’s counsel to determine reasonableness. This is a clever approach by Chief Bankruptcy Judge Thad Collins because the court was familiar with both firms and the case was so unusual. Critics may claim that this decision penalizes the creditor’s attorneys for being diligent, but this concern is overstated. An oversecured creditor must be able to justify their attorney’s billing to the bankruptcy court just as that
What Every Bankruptcy Lawyer Must Know About Chapter 12
Shareholder Joe Peiffer and associate Austin Peiffer recently co-authored an article on chapter 12 bankruptcy with Vermont bankruptcy trustee Jan Sensenich. It was published in the May 2021 edition of the American Bankruptcy Institute‘s ABI Journal. **As of April 1, 2022, the chapter 12 bankruptcy debt limit was raised to $11,097,350.
Tough Financial Times in Agriculture and Lending Clauses – Peril for the Unwary
Overview The farm economy continues to struggle. Of course, certain parts of the country are experiencing more financial trauma than are other parts of the country, but recent years have been particularly difficult in the Corn Belt and Great Plains. Aggregate U.S. net farm income has dropped by approximately 50 percent from its peak in 2011. It is estimated to increase slightly in 2017, but it has a long way to go to get back to the 2011 level. In addition, the value of farmland relative to the value of the crops produced on it has fallen to its lowest point ever. A dollar of farm real estate has never produced less value in farm production, and real net farm income relative to farm real estate values have not been as low as presently since 1980 to 1983. A deeper dive on farm financial data indicates that after multiple years of declining debt-to-asset ratios, there was an uptick in 2015 and 2016. Relatedly, default risk remains low, but it also increased in 2015 and 2016. Also, there has been a decline in the ratio of working capital to assets, and a drop in the repayment capacity of ag loans. As a financial fitness indicator, repayment capacity is a key. At the beginning of the farm debt crisis in the early 1980s, it dropped precipitously due to a substantial increase in interest payments and a decline in farm production. That meant that land values could no longer be supported, and they dropped substantially. Consequently, many farmers found themselves with collateral value that was lower than the amount borrowed. Repayment capacity is currently a serious issue that could lead to additional borrowing. While financial conditions may improve a bit in 2017 and on into 2018, working capital may continue to erode in 2017 which could lead to increased debt levels. That’s because average net farm income will remain at low levels. This could lead to some agricultural producers and lenders having to make difficult decisions before next spring. It also places a premium on understanding clause language in lending document and the associated rights and obligations of the parties. Two clauses deserve close attention. One clause contains “cross-collateralization” language. “Cross-collateralization” is a term that describes a situation when the collateral for one loan is also used as collateral for another loan. For example, if a farmer takes out multiple loans with the same lender, the security for one loan can be used as cross-collateral for all the loans. A second clause contains a “co-lessee” provision. That’s a transaction involving joint and several obligations of multiple parties. Today’s post takes a deeper look at the implications of cross-collateral and co-lessee language in lending documents. My co-author for today’s post is Roger McEowen of Washburn University’s School of Law. Roger and I have worked together on many presentations through the years on law and taxation. Cross-Collateralization Language As noted above, clause language in lending and leasing documents should be carefully reviewed and understood for their implications. This is particularly true with respect to cross-collateralization language. For example, the following is an example of such a clause that appears to be common in John Deere security agreements. Here is how the language of one particular clause reads: “Security Interest; Missing Information. You grant us and our affiliates a security interest in the Equipment (and all proceeds thereof) to secure all of your obligations under this Contract and any other obligations which you may have to us or any of our affiliates or assignees at any time and you agree that any security interest you have granted or hereafter grant to us or any of our affiliates shall also secure your obligations under this Contract. You agree that we may act as agent for our affiliates and our affiliates may as agent for us, in order to perfect and realize on any security interest described above. Upon receipt of all amounts due and to become due under this Contract, we will release our security interest in the Equipment (but not the security interest for amounts due an affiliate), provided no event of default has occurred and is continuing. You agree to keep the Equipment free and clear of all liens and encumbrances, except those in favor of us and our affiliates as described above, and to promptly notify us if a lien or encumbrance is placed or threated against the Equipment. You irrevocably authorize us, at any time, to (a) insert or correct information on this Contract, including your correct legal name, serial numbers and Equipment descriptions; (b) submit notices and proofs of loss for any required insurance; (c) endorse your name on remittances for insurance and Equipment sale or lease proceeds; and (d) file a financing statement(s) which describes either the Equipment or all equipment currently or in the future financed by us. Notwithstanding any other election you may make, you agree that (1) we can access any information regarding the location, maintenance, operation and condition of the Equipment; (2) you irrevocably authorize anyone in possession of that information to provide all of that information to us upon our request; (3) you will not disable or otherwise interfere with any information gathering or transmission device within or attached to the Equipment; and (4) we may reactivate such device.” So, what does that clause language mean? Several points can be made: The clause grants Deere Financial and its affiliates a security interest in the equipment pledged as collateral to secure the obligations owed to it as well as its affiliates. When all obligations (including debt on the equipment purchased under the contract and all other debts for the purchase of equipment that Deere Financial finances) to Deere under the contract are paid, Deere Financial will release its security interest in the equipment. That appears to be straightforward and unsurprising. However, the release does not release the security interest of the Deere’s affiliates. This is the cross-collateral provision. The clause also makes Deere Financial the agent of its affiliates,