Farmer’s debt spiral – don’t wait for the bailiff

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When a farmer falls into a debt trap, this does not necessarily mean that he will face bailiffs or bankruptcy. The law provides for other – beneficial for farms solutions.

A farmer can resort to repair and debt relief solutions that have priority over total bankruptcy. These restructuring procedures apply when:

  • a farmer can be considered an entrepreneur
  • early enough, he accepts the idea that he is not dealing with his own finances.


Can every farmer restructure himself?

Can every farmer restructure himself?

To benefit from judicial restructuring, a farmer must be considered an entrepreneur. This means that he must run a farm not only to meet his own needs, but also to sell agricultural products. Such farmers may submit a restructuring application when they are insolvent or already at the risk of insolvency. Therefore, the remedial program can be implemented even at the stage when they settle payable cash obligations on time. Provided that they forecast that there will be problems with this repayment soon.

The possibility of carrying out judicial restructuring appeared for all entrepreneurs (including farmers) in 2016. The solution is so favorable that more and more farms are choosing this course of action in the case of financial problems.


First repair then liquidation

farm loan

This is the main thought of the new restructuring law. It can be said that he has a protective umbrella over farmers against ongoing bailiff executions. This way of thinking is to enable the debtor to negotiate an optimal agreement with his creditors. So that he would start paying off debts without destabilizing the farm.

Interestingly, you do not need to immediately reach an agreement with all creditors. Sometimes the problem is resolved by a settlement with the largest creditor and such a solution provides for a partial arrangement.


What will the bailiff not take during restructuring?

farm debt

Restructuring proceedings may take different forms. Depending on this, the scope of restrictions imposed on the bailiff changes:

  • if sanation proceedings have been opened, enforcement proceedings cannot be carried out on all the assets that are necessary for running the farm,
  • if arrangement or accelerated arrangement proceedings have been opened, it is impossible to carry out enforcement proceedings against assets not covered by the pledge or mortgage.

Importantly, during restructuring, an indebted farmer does not have to, and even cannot, pay liabilities arising before the day on which the proceedings began. The repayment will take place only after its completion, on the terms (amount and repayment terms) of the arrangement with creditors (if concluded).


Supervised farmer

farmer loan

The receiver inevitably appeared in the bankruptcy proceedings. His restructuring advisor plays the role of restructuring. Importantly, entrusting this function to a specific person is not only decided by the court – creditors and debtors have the opportunity to indicate who they want in this role in a particular proceeding.

So during the recovery proceedings such a supervisor:

  • in the event of arrangement or accelerated arrangement proceedings, he must agree to the farmer’s most important actions,
  • in sanation proceedings, the administrator manages the farmer’s enterprise.

After approving the system, the farmer regains the right to full management of his farm.


What can be achieved through restructuring?

debt loan

The range of possibilities is quite wide. Depending on the situation:

  • part of the claim may be written off,
  • interest may be reduced or written off,
  • repayment will be spread over many installments,

What if the farmer is not an entrepreneur? Although he cannot take advantage of the aforementioned facilities, in the end similar options often open up before him. 

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