Managing Editor
District leads nation in farmer, fishermen bankruptcies
Jacksonville has another distinction.
The Middle District of Florida leads the nation in Chapter 12 bankruptcy filings. Within it, the Jacksonville Division leads other divisions nationwide, too.
Chapter 12 is designed for family farmers and family fishermen with regular annual income and allows them to repay all or part of their debt through a plan of reorganization.
Douglas Neway, the Chapter 13 Standing Trustee for the Middle District, also is the Chapter 12 Case by Case Trustee, as well as president of the Jacksonville Bankruptcy Bar Association.
The Chapter 12 distinction isn’t a large number - 36 - compared to the tens of thousands of Chapter 7 liquidations, thousands of Chapter 13 individual debt adjustments and hundreds of Chapter 11 reorganizations in the district.
But at 36, for the 12 months through March 2010, it was ahead of the 33 each in the Eastern District of California and the Middle District of Georgia, according to U.S. Courts.
Most of the districts in the country had fewer than 10 Chapter 12 filings in the same period.
Neway said many of the Middle District filings stem from the bankruptcy reorganization filing of poultry food processor Pilgrim’s Pride Corp., which has operated a production plant in Live Oak, in the area of the Jacksonville Division.
When Texas-based Pilgrim’s Pride filed for Chapter 11 reorganization in December 2008, it cut back production. When that happened, Live Oak area farms that grew chickens or operated egg-hatching operations for the chickens were affected, said Neway.
He said Pilgrim’s Pride had earlier informed the farmers that they needed to upgrade to meet standards, so the farmers took out loans to update their operations.
When Pilgrim’s Pride scaled back to reorganize, the farmers continued to generate income, but not as much and not enough to pay the loans as structured, he said.
“That’s the main reason there have been so many,” said Neway.
“Filing Chapter 12 became necessary because it allowed them to continue operations and modify loans,” he said.
“A 12 will only work if you have income,” he said. “Those filing Chapter 12 were those with revenues.”
Pilgrim’s Pride emerged from reorganization in December 2009 with a 64 percent stake owned by JBS USA, a unit of JBS S.A. in Brazil. It posted net sales of $7.1 billion in fiscal 2009 and is ranked No. 317 on the Fortune 500 list of the nation’s largest companies.
It employs about 41,000 people in the United States and Mexico with major facilities in 12 states, including Florida and Georgia, and in Puerto Rico and Mexico, along with other facilities in Arizona and Utah.
The company has renewed operations in Live Oak, said Neway. Florida Trend magazine reported in its August issue that Pilgrim’s Pride emerged from Chapter 11 last year and created 250 jobs in Live Oak because of a new partnership with the state to promote Florida-raised chicken.
Florida Trend reports that the state awarded the California-based company $500,000 in job-creation incentives to maintain at least 1,175 jobs at its Live Oak plant for five years, create 35 more jobs and invest $1.5 million by the end of next year.
“It is now telling the farmers, “Hey, we need you,” said Neway.
Area Development Online reported in June that Pilgrim’s Pride is adding a second shift to accommodate demand for its “Fresh from Florida” chicken, which represents a partnership with the Florida Department of Agriculture and Consumer Services.
“Fresh from Florida” products are grown or produced in the state.
Neway said he is also seeing Chapter 12 filings by a few horse farms in Ocala, some sod farmers and plant nurseries and some family farms, mostly in rural counties.
He also is seeing a few fishermen from Mayport filing.
Neway said just a handful of Chapter 12s were being filed when he was appointed Oct. 1, 2007.
For all of 2009 and the first half of 2010, the Middle District of Florida has seen 49 Chapter 12 filings - 34 last calendar year and 15 so far this year.
The Middle District of Florida accounted for 6 percent of the national total of 605 Chapter 12 filings for March 2009-2010.
Again for comparison, there were 1.1 million Chapter 7 filings, 416,000 Chapter 13s and 15,250 Chapter 11s.
While the Middle District of Florida leads the nation, the question is whether the BP oil spill will drive fishermen along the Gulf Coast into Chapter 12.
Neway said that will depend on the extent of the spill on revenues. To file Chapter 12, the petitioner must have income. Otherwise, the petitioner might be more likely to file Chapter 7 or, if it is a large organization, Chapter 11.
Neway said the distinction of leading the nation in Chapter 12 filings might mean some cases can shape bankruptcy laws. “With so many, we are poised to,” he said.
The Middle District of Florida consists of 35 of the state’s 67 counties. The district consists of four divisions - Orlando, Tampa, Fort Myers and Jacksonville. Jacksonville covers 16 counties - Baker, Bradford, Citrus, Clay, Columbia, Duval, Flagler, Hamilton, Marion, Nassau, Putnam, St. Johns, Sumter, Suwannee, Union and Volusia, many of them with a strong rural presence.
Chapter 12: Family Farmer or Family Fisherman Bankruptcy
• This chapter of the U.S. Bankruptcy Code provides for adjustment of debts of a “family farmer” or a “family fisherman,” as defined in the bankruptcy code, with “regular annual income.”
• It enables financially distressed family farmers and fishermen to propose and carry out a plan to repay all or part of their debts.
• Debtors propose a repayment plan to make installments to creditors over three to five years, but no longer than five years.
• Chapter 12 is more streamlined, less complicated, and less expensive than Chapter 11, which is better suited to large corporate reorganizations.
• Few family farmers or fishermen find Chapter 13 to be advantageous because it is designed for wage earners who have smaller debts than those facing family farmers.
• When a Chapter 12 petition is filed, an impartial trustee is appointed to administer the case.
• Filing a Chapter 12 petition automatically stays (stops) most collection actions against the debtor or the debtor’s property. As long as the stay is in effect, creditors generally cannot initiate or continue any lawsuits, wage garnishments or even telephone calls demanding payments. The bankruptcy clerk gives notice of the bankruptcy case to all creditors whose names and addresses are provided by the debtor.
Source: U.S. Courts
356-2466