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Robbing Peter to pay Paul doesn’t work

 

An ag attorney says there are three big mistakes farmers make that can lead to bankruptcy.

“Incurring credit to pay off existing debt is the first sign.”

Scott Chernich with Foster Swift Collins & Smith in Michigan tells Brownfield overextension and incurring debt far beyond the value of the farm’s assets, poor record keeping and too much optimism can lead to trouble.  “Everybody thinks they can dig their way out and once they’re in trouble—they don’t recognize it, they don’t want to be honest with themselves about what their operation is—and you end up digging the hole deeper because you think you can get out.”

He says if a farm operation is in financial trouble, it needs to hire competent consultants and contact lenders with a payment plan that is possible. But, if the farmer runs of out time before debts are paid, it can lead to bankruptcy or total liquidation of farm assets.

Chernich says he has recently has been involved in some very large farm dissolutions where everything is sold at auction. He expects to see more farm bankruptcies if the farm economy doesn’t turn around soon.

AUDIO: Brownfield interview with Scott Chernich during the Great Lakes Crop Summit