Can I Keep Paying My Farm Leases if I File for Bankruptcy?

For farmers facing financial hardship, the question of whether you can continue paying farm leases after filing for bankruptcy is often one of the most pressing concerns. Your leased land, equipment, and facilities may be essential to keeping your agricultural operation running, and losing access to these assets  impacts your overall  farming business. The good news is that bankruptcy law, particularly Chapter 12 bankruptcy designed for family farmers, allows you to maintain important lease agreements while restructuring your debts.

Understanding how bankruptcy affects your lease obligations can help you make informed decisions about protecting your farm’s future. At Biggs Law Firm, we’ve guided many North Carolina farmers through the bankruptcy process while helping them preserve the leases and assets necessary to continue their operations.

What Happens to My Farm Leases When I File for Bankruptcy?

When you file for bankruptcy, an automatic stay immediately goes into effect, stopping most collection actions by creditors. This includes preventing landlords from terminating leases or evicting you for unpaid rent that accumulated before your bankruptcy filing. However, the automatic stay doesn’t eliminate your lease obligations. Instead, it creates a temporary pause that gives you breathing room to address your financial situation.

In Chapter 12 bankruptcy, which is specifically designed for family farmers and fishermen, you have several options for handling lease agreements. You can choose to assume a lease, meaning you commit to continuing the lease under its original terms and catching up on any past-due payments. Alternatively, you can reject a lease if it’s no longer beneficial to your operation. If you decide to assume a lease, you must demonstrate that you can make future payments while also meeting your other plan obligations.

How Does Chapter 12 Bankruptcy Protect Agricultural Leases?

Unlike Chapter 11 or Chapter 13, Chapter 12 was created with the agricultural community’s specific needs in mind, recognizing that farming involves seasonal income, weather-related uncertainties, and long production cycles.

In your Chapter 12 cases, you can continue to make lease payments for those leases that you want to keep according to their existing payment schedule. 

Additionally, Chapter 12 allows you to modify certain secured debts and restructure your financial obligations in ways that make it more feasible to maintain lease payments. The goal is to create a sustainable plan that lets you continue farming while addressing your debts. What If I’m Behind on Lease Payments Before Filing?

Many farmers entering bankruptcy are behind on various obligations, including lease payments. Being in arrears doesn’t automatically mean you’ll lose your leased property. When you file for Chapter 12 bankruptcy, past-due lease payments can be addressed through your repayment plan.

It’s important to communicate with your landlord during this process. Many landlords prefer to work with farmers who are making a good-faith effort to reorganize rather than face the uncertainty and expense of finding a new tenant. Being transparent about your financial situation and your commitment to continuing the lease under your bankruptcy plan can help maintain these important business relationships.

Can Landlords Terminate My Lease During Bankruptcy?

The automatic stay that goes into effect when you file bankruptcy prevents your landlord from terminating your lease or taking eviction action for defaults that occurred before your filing, without permission from the bankruptcy court. This protection gives you time to catch up on past-due payments through your repayment plan.

However, this protection isn’t absolute. If you fail to make current lease payments that come due after you file bankruptcy, your landlord may be able to seek relief from the automatic stay and proceed with eviction or lease termination. This is why it’s essential to prepare a yearly operating budget during Chapter 12 to make sure you set aside sufficient funds to pay land leases. 

Similarly, if you reject a lease in your bankruptcy plan, the landlord can terminate it and pursue claims for unpaid rent as an unsecured debt in your case. This might be appropriate if a particular lease is too expensive or no longer serves your operational needs.

How Can Biggs Law Firm Help North Carolina Farmers Protect Their Leases?

At Biggs Law Firm, we understand that your farm leases aren’t just contracts on paper. They represent long term family relationships, and directly impact your operation. Our team has extensive experience working with North Carolina farmers facing financial challenges, and we’re deeply familiar with the agricultural realities that affect farm economics in Eastern North Carolina.

We take a hands-on approach to helping you structure a Chapter 12 bankruptcy plan that protects your essential leases while creating a realistic path to financial stability. Our goal is to bring order out of chaos, helping you preserve your farming operation while addressing your financial difficulties.

If you’re concerned about keeping your farm leases while considering bankruptcy, we invite you to schedule a consultation with our team. We’ll listen to your specific circumstances, explain your options in clear language, and help you understand how Chapter 12 bankruptcy can protect your agricultural operation. Contact Biggs Law Firm today at (919) 375-8040 to discuss how we can help you move forward with confidence.