Mounting
Citrus Losses May Make Bankruptcy Attractive for Growers
Jan. 16, 2007
FOR IMMEDIATE RELEASE
Bakersfield, Cal.—Near
record breaking cold over the last week in central California
caused speculation that some citrus growers face near total losses.
How will growers weather near total financial loss? Many farmers today
are diversified among many crops. This diversification allows losses to be spread among many harvests.
Other will go into debt or dip into their savings to weather the losses caused by this cold front. The rest will negotiate arrangements with their creditors, do nothing, or file bankruptcy.
An experienced bankruptcy attorney can “assess the growers financial condition and help guide the decision-making
process with—or without—bankruptcy,” said Phillip Gillet, Jr., a Bakersfield,
California bankruptcy attorney.
“Getting a professional involved early in the process is vitally important. The grower can be advised about the
proper actions to take and can often avoid bankruptcy simply by negotiating well with their creditors and getting good advice
up front,” continued Gillet.
The media coverage around the October 2005 bankruptcy overhaul led many to believe that bankruptcy is no longer available.
“The misconception that bankruptcy no longer helps is simply wrong. In fact, chapter 12 of the Bankruptcy Code,
which is designed for family farmers or fishermen was made permanent as a result of the October 2005 law changes,” said
Gillet.
Chapter 12 was tailed for family farming and is more streamlined, less complicated and less expensive than other forms
of bankruptcy for farmers. To file chapter 12, a farmer must have “annual
income,” have debt of less than $3,237,000, at least 50% of the debt must be related to farming (excluding their home),
and more than 50% of the farmer’s gross income for the past 3 years must be farm related. If the operation is a partnership or corporation, it must be more than 50% owned by one family and its
relatives, 80% of the value of the assets must be related to farming, and the company cannot be publicly traded.
“A chapter 12 bankruptcy allows the debtors to propose a plan to pay their creditors back over 3 to 5 years with unsecured creditors typically receiving less than full payment. The debtors are generally able to keep their home, vehicles, equipment and other assets necessary for the
farming operation,” said Gillet.
Upon the completion of chapter 12 plan payments, the debtors receive a bankruptcy discharge, which gives them their
“fresh start.”
Debtors ineligible for chapters 12 or 13 wanting to reorganize must file under chapter 11. Chapter 11 bankruptcies are more complicated, more expensive, and its laws are more creditors friendly;
however, a chapter 11 can, and does, provide a means of reorganizations for high net worth individuals, partnerships, corporations
and other corporate-like entities. A chapter 11 debtor proposes a reorganization
plan that is voted upon by the creditors. At the completion of the plan, the
chapter 11 debtor comes out reorganized.
“Chapter 11 provides high net worth farmers a method of curing their financial problems over time,” said
Gillet.
Chapter 11, 12 or 13 can be an effective means for farmers to deal with losses sustained from calamities like the recent
cold front,” continued Gillet.
Phillip W. Gillet, Jr., M.S., J.D., EA is a Bakersfield, California bankruptcy, real estate & tax lawyer.
Mr. Gillet holds bachelors degrees in Economic and Busienss Administration, Accounting from CSU, Bakersfield. He has a master’s degree
in Accountancy from San Diego State
University, and a Juris Doctor from California Western School of Law. He is admitted to practice before the United States Bankruptcy Courts for the Eastern,
Central and Southern Districts of California, the United States Tax Court, and all California
state courts. He has been the attorney of record in more than 600 bankruptcy
cases.
Contact:
Phillip Gillet, Jr.
Attorney at Law
1705
27th Street
Bakersfield,
California 93301-2807
(661) 323-3200
Fax (661) 323-3078
www.bakersfieldlaw.org
email: lawyer@bak.rr.com
