TOPEKA, KAN. (RFD-TV) — A Kansas bankruptcy court ruling could give family farmers additional flexibility when restructuring secured debt under Chapter 12 bankruptcy, potentially allowing some repayment plans to extend beyond the general five-year limit.
Roger McEowen with Washburn University School of Law joined Market Day Report to explain the case, what the decision could mean for financially distressed producers and why farmers should address repayment problems before missing a payment.
Drought Forces Kansas Farmer to Restructure Debt
In his interview with RFD-TV, McEowen explained the case involving a Kansas farmer who filed Chapter 12 bankruptcy in 2019. His confirmed repayment plan required him to repay a bank approximately $685,000 over seven years.
Drought created serious challenges for his cattle operation, limiting access to pasture and feed. The farmer eventually had to liquidate his cow herd, reducing his debt to just under $400,000 but also eliminating an important source of operating income.
After missing a payment in February 2025, he asked the bankruptcy court to allow him to repay the remaining debt over 10 years rather than follow the original schedule.
Court Finds Potential Exception to Five-Year Limit
The central legal question was whether a farmer could modify a confirmed Chapter 12 repayment plan to extend payments on secured debt beyond the general five-year limitation.
The bank argued that the Bankruptcy Code prohibited such an extension. The court disagreed, finding that provisions allowing extended repayment periods for secured claims provide an exception to the general time limit.
McEowen said the decision could provide meaningful flexibility for farmers trying to keep their operations running while managing financial hardship.
“The five-year limitation doesn’t automatically prevent a farmer from extending payments on a secured debt beyond that,” McEowen said.
However, he emphasized that the ruling does not automatically approve the farmer’s proposed modification or resolve every issue in a bankruptcy case.
Ruling Does Not Guarantee Relief for Every Farmer
McEowen cautioned that the decision is not a blanket permission for farmers to disregard their bankruptcy obligations.
Producers still have to meet other requirements to modify an existing Chapter 12 plan. Filing a modification request also does not automatically prevent a secured creditor from seeking relief from the automatic stay.
He noted that other bankruptcy courts have reached the opposite conclusion on the five-year limitation, meaning the Kansas ruling does not establish a universally accepted interpretation.
“This is one judge in Kansas ruling on a specific set of facts, but it’s very helpful in other courts,” McEowen said.
Lenders May Benefit From Working With Farmers
The ruling also offers a reminder for agricultural lenders to consider whether restructuring debt may be a better outcome than liquidating an operation.
McEowen said lessons from the farm financial crisis of the 1980s showed that working with producers can sometimes be more economical for lenders than forcing liquidation.
In some circumstances, helping a farmer restructure and continue operating can benefit both the producer and the lender.
Address Financial Problems Before Missing Payments
McEowen’s biggest recommendation for farmers is to address financial concerns early rather than waiting until a repayment deadline is missed.
Drought, declining commodity prices and other production challenges can make an existing repayment plan unworkable. Producers should communicate with their bankruptcy attorneys and creditors as soon as those problems become apparent.
He recommended gathering financial records, documenting production losses and preparing realistic cash-flow projections before approaching lenders about possible solutions.
“If you’ve got drought or declining commodity prices or some other circumstance that’s going to make the repayment plan unworkable, talk with your bankruptcy attorney immediately,” McEowen said.
Firm to Farm: Extending Chapter 12 Repayment Plans
Read more of Roger McEowen’s thoughts on agricultural law and policy issues that matter to farmers and ranchers on his RFD Business Blog, Firm to Farm.
