CHICAGO • With agricultural lenders fearing a tidal wave of farm bankruptcies as soon as this spring, lawyers in the Midwest say they want U.S. Sen. Chuck Grassley of Iowa to raise the debt limit for so-called "family farmer" bankruptcies.
Farmers in states like Illinois, Indiana and Iowa are scrambling to secure lending for the 2016 growing season at a time when prices for their corn have halved from three years ago.
Many younger farmers, who tend to be more cash poor than their elders, are expected to be among the hardest hit by stubbornly high input costs such as fertilizer and seeds and souring export sales.
As they seek restructuring advice, many are told their debts surpass the $4 million limit for a Chapter 12 family farm bankruptcy, said at least five lawyers who represent either debtors or creditors.
They say the $4 million cap is out of touch with most farms' current operating size, often thousands of acres of land paid for by expensive leases and worked using tractors that can cost more than $250,000.
"The debt limit for Chapter 12 bankruptcies should be raised to at least $10 million," said Joseph Peiffer, a bankruptcy attorney in Cedar Rapids, Iowa.
Chapter 12 was created during the 1980s farm crisis as a simple court procedure to let farmers keep operating while working out a plan to repay lenders.
Without a new limit, farmers would be forced into a Chapter 11 filing, which is more costly and onerous.
Peiffer has presented his proposal to Grassley, who also heads the Senate Judiciary Committee which oversees bankruptcy law.
Grassley's office said the senator had seen a proposal to raise the Chapter 12 debt limit and was still gathering information.
The U.S. Department of Agriculture has estimated that net farm income plummeted in 2015 to $55.9 billion, down nearly 55 percent from an all-time high in 2013. The final data is set for release next month.
The USDA has also forecast that the data will show farmers' debt-to-asset ratio grew to 12.8 in 2015 from 11.3 in 2013.
Last spring, some farmers took the extreme step of breaching their lease contracts, reducing how much land they will sow this spring and risking years-long legal battles with landlords.
Since then, leading players in the agricultural sector have seen their businesses hurt by lower farm income and grain prices. These include tractor maker Deere & Co., seeds and chemical leader Monsanto Co. and top grain buyer Archer Daniels Midland Co.