The Tariff Hoax: The Farmer Bailouts to Avoid Bankruptcy
In the world of debt restructuring, statistics are critical. While some argue that figures can be manipulated for a specific outcome, the fact is that the current surge in bankruptcy filings, affecting consumers, large and small businesses, and farmers, is not the type of data that can be disputed.
The latest U.S. Courts data reveals an undeniable economic reality for consumers and small and large businesses.
By Alexander Hernandez, J.D., Professor, and Author of Consumer Bankruptcy Law (Routledge).
The Tariffs Are the Reason for the Farmer Bailouts (History is Repeating Itself)
During the first Trump administration, we witnessed the Executive Branch responding with the Market Facilitation Program (MFP) and other financial aid packages, which were intended to compensate farmers for the losses caused by the government’s own failed trade policy and self-imposed tariff war in 2018.
The MFP payments provided distressed farmers with the necessary cash to make their debt payments and cover their ongoing costs, preventing foreclosure actions that would otherwise force them to seek Chapter 11 or Chapter 12 protection, or Chapter 7 if they were forced to liquidate.
In 2019, Chapter 12 farm bankruptcies spiked to their highest level in over a decade. The bankruptcy surge was fueled by the trade war and retaliatory tariffs, which shut down major export markets for U.S. crops and slashed farm revenues, driving farmers into bankruptcy.
The Second Financial Blow to Farmers
The financial burden on farmers is compounded by policy decisions that have quietly dismantled traditional safety nets and essential long-standing programs like Food for Peace and USAID that have been dismantled.
These programs are often overlooked, but they represent a crucial, reliable market for American commodities, moving billions of dollars worth of surplus grain, soy, and other products. Cutting them costs farmers billions, forcing them to absorb revenue loss created by government action.
This establishes a worrying precedent: government policy is creating market distress (tariffs, aid cuts) that drives insolvency, which is then temporarily fixed by government aid (bailouts). That’s not an economic system that can survive.
Create a problem, then fix it by printing up money to overcome the losses. That’s debt by another name. The federal deficit has increased by $1 trillion when compared to last year.
Farmers who struggled during the 2018 trade war under the Trump administration, who were then stabilized temporarily by government aid, are now facing the exact scenario in Trump’s second term.
This means after Trump’s first term, farmers had four years to recover, only to face the same issue again. This leaves the agricultural sector and farming community unable to prepare for long-term economic success.
The Professor’s Take: The 55% Warning
The sharp 55% increase in Chapter 12 cases in 2024 is a result of Emergency aid and MFP funds having dried up long ago. However, the underlying issues, such as surging farm debt and decreased cash because of the closure of critical surplus programs, remain. Inflation only adds fuel to the financial fire.
Chapter 12 filings will likely continue to increase, even if delayed temporarily because of the bailout. It would not be surprising to continue to see a surge in bankruptcy filings across all chapters, as I have been making this prediction year-long.
Professor Hernandez is an attorney specializing in consumer finance and debt relief. He is the published author of Consumer Bankruptcy Law (Routledge Publishing) and teaches law and finance courses in both English and Spanish for an international university.
Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. Paralegals and students who are buying single copies can do so via Amazon Books. To access my YouTube channel, click this link. You can also listen to my podcast on Spotify.
You can learn more about filing for bankruptcy and the bankruptcy petition via this link. Information on the bankruptcy court system, contact information for trustees, and your state’s exemptions can be found here. The federal bankruptcy exemptions are listed here. The latest version of the 341 Meeting of the Creditors can be found here.
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