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May 7, 2025 - By Ching Lee - After a four-year downward trend, U.S. farm bankruptcies are on the rise again, and with uncertainties about the impacts of U.S. tariffs on export trade, there’s growing concern that the financial health of farms across the country will continue to falter.
A total of 216 U.S. farms filed for Chapter 12 bankruptcy last year, up 55% from 2023. With 17 filings, California led the nation.
Peter Fear, a bankruptcy attorney in Fresno, said he has seen an uptick in farmers seeking consultations on debt relief during the past year and a half.
He cited three major factors pinching California farmers: lower commodity prices, especially for crops such as tree nuts and winegrapes; increased operating costs, including higher wages for employees; and elevated interest rates, which have increased borrowing costs and further strained farmers’ cash flow.
But pressures that have forced farmers to seek financial relief have been simmering for some time, he noted, and bankruptcies represent a last resort after they have exhausted all other options.
“This is not new,” Fear said. “This is not something that happened in the last 90 days. This is something that has been happening for several years.”
Shawn Gill, who farms almonds in Sutter, Placer and Fresno counties, has been trying to reorganize his debts under Chapter 12 after several weather-related bad crop years that were made worse by depressed almond prices and soaring expenses. With interest rates that surged from 2.9% to nearly 9%, his monthly payments shot up from $6,000 to $28,000. Before filing for bankruptcy, he had already sold a vineyard in Lodi to try to cover some of his debt.
“It’s just the tip of the iceberg,” Gill said, noting he has friends who are in a similar situation. “You’re going to see a lot more bankruptcies or people going under.”
Because Chapter 12 is designed specifically for family farmers with more than 50% of their debts in farming, the filings do not account for all farm bankruptcies. Farms that are over the debt limit—currently at $11,097,350—may need to file Chapter 11, Fear said, noting a lot of farms have gone this route. Those that have been liquidated typically file Chapter 7. In addition, there are other types of proceedings besides bankruptcy “that demonstrate the distress that farms are going through,” he said.
Fear said he has worked with dairy farms that have used Chapter 7 because “there’s just no way to make it work financially.” Such filings were more prevalent from 2009 to 2012 amid the economic downturn triggered by the subprime mortgage crisis. The period from 2010 to 2012 also saw the most Chapter 12 bankruptcies in California during the past 24 years, with 66, 67 and 66 filings, respectively.
Fear said he’s now seeing new Chapter 7 filings by dairies—and more cases involving almonds.
Created in 1986, Chapter 12 bankruptcy allows financially distressed family farmers and fishermen to repay debts in seasonal installments over three to five years while keeping their operation in business.
Linda Coco, a law professor at the University of the Pacific McGeorge School of Law in Sacramento, said Chapter 12 is different from other chapters of the Bankruptcy Code because it “addresses the unique experience of the farmer,” whose livelihoods are attached to the land they own.
“The whole idea of Chapter 12 is to prevent the creditors from having access to the debtor’s land,” she said.
Because Chapter 12 is specifically tailored to family farmers and fishermen, Coco said, it is less common than other bankruptcies, and upticks in filings usually indicate “something’s really, really wrong.”
For example, from 2009 to 2018, Chapter 12 accounted for 0.05% of all bankruptcy filings compared to 67% for Chapter 7, 32% for Chapter 13 and 1% for Chapter 11, according to calculations by the American Farm Bureau Federation. During that time, California had the most Chapter 12 filings, with 408.
AFBF economist Samantha Ayoub said it is possible that California and other states with specialty crops, such as Michigan, saw higher levels of bankruptcies because they face rising labor costs and import competition. Others note higher-value crops often require higher input costs.
One reason Chapter 12 is not often used is farmers typically get federal support during crisis moments, Coco said, including crop insurance, loans and programs to address low commodity prices and losses due to natural disasters, pests and diseases.
But Arshdeep Singh, a Fresno County citrus grower and director of the Punjabi American Growers Group, said there is no support for California farmers in the San Joaquin Valley who have been financially pummeled by impacts of the state’s Sustainable Groundwater Management Act. Some have filed for bankruptcy or are on the verge of it as their land value has plummeted and their equity has evaporated, with banks calling on their loans.
“Right now, there’s not an option for those growers because once they’re down, they’re down. They have to file bankruptcy,” Singh said.
With commodity prices sliding and grower margins becoming thinner, he said he expects SGMA-related bankruptcies will grow exponentially in the next three to five years.
Beyond bankruptcies, Michael Naito, who grows almonds, pistachios and grapes in Madera and Fresno counties, said he has seen an increasing number of farmers in recent years choosing to sell off their assets and exit the business simply because “they don’t want that kind of stress.” Some of them are farming families that have farmed for generations, he added.
Whereas others would have swooped in to buy those farms in the past, Naito said people are much more cautious today and less willing to take the risk of expanding, especially with concerns about the Trump administration’s tariffs and impacts on export trade and the economy.
“They don’t want to extend themselves,” Naito said. “They’re just waiting it out.”
Ching Lee is editor of Ag Alert. She may be contacted at clee@cfbf.com.
The California Farm Bureau Federation works to protect family farms and ranches on behalf of nearly 32,000 members statewide and as part of a nationwide network of more than 5.5 million Farm Bureau members.
Source: Reprinted with permission CFBF
