Agricultural Law and Rural Practice Blog: A Business, a Way of Life: Representing Family Farms with Financial Problems:

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  • Agricultural Law and Rural Practice Blog
    February
    21
    2018

    A Business, a Way of Life: Representing Family Farms with Financial Problems

    J. David Krekeler

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    Solving the financial problems of a family farm requires all the skills possessed by good insolvency lawyers as well as an understanding of agricultural business and production, says J. David Krekeler. Helping a family farm business requires knowledge of the various factors and challenges unique to a family farm.
    farmer and grandchild

    Solving financial problems that farming families undergo requires not only all the skills possessed by good insolvency lawyers, but also a deep understanding of agricultural business and production.

    Farmers facing financial troubles are different from most other debtors. Helping a farm business is difficult, and perhaps impossible, without understanding the various factors and challenges that are unique to a family farm.

    Perhaps foremost among those is the concept that farming is not just a business, but a way of life. While this may be true for some other businesses as well, this belief and culture is most dominant in family farmers.

    Dealing with business financial problems is always difficult. Often, the owners feel that those financial problems reflect a failure on their part. This feeling is sometimes exacerbated with a family farm. The farm was often purchased or received from the parents. In some instances, a farm may have been operated by the family for decades. Wisconsin even designates qualifying farms as “century farms” or “sesquicentennial farms.”1

    Many times, the current operators of the farm very much desire to leave the farm to their children. This requires staying in business. Sometimes this desire overrides economically rational thought, causing the farm client to take actions belatedly or even actions which should not have been taken at all.

    Initial Meetings Require Time and Empathy

    The initial meeting or conference often requires more time and empathy than normal. Goals and rationales often need to be carefully brought out and developed. The client may have to be given the time and attention to fully explain how he or she feels about the situation. Probing questions are often necessary to ascertain the true goals and objectives.

    David Krekeler J. David Krekeler, UW 1979, has been solving financial problems for farmers since 1983 and is a founding principal and shareholder with Krekeler Strother, S.C., Madison. Keeping Wisconsin farmers farming is the heart of his practice, which includes workouts, settlements, and bankruptcy cases.

    Keeping financially troubled businesses in business always requires knowledge and understanding of that business, including its sales, production, and financial operations. Representing a farm business is no different, except that the scope and breadth of that understanding is extremely broad.

    Depending upon the type of operation, farmers have a working knowledge of mechanical systems, biology, husbandry, ecology and conservation, and genetics. Today’s successful farmer must be able to use intellectual technology and must understand finance. To successfully craft a strategy for the farmer, the lawyer needs at least a rudimentary understanding of these topics and more.

    It would be next to impossible to ask the right questions on direct examination at a reorganization confirmation hearing without understanding the basics of farm finance and production. The farmer must demonstrate that the proposed plan is feasible, which will require testimony about production and finance. The lawyer must therefore understand crop yields and dairy production terms like “hundred weight” and “somatic cell count.”

    Identifying the Family Farm Client

    The very term “family farm” denotes an enterprise of more than one person.

    The enterprise may consist of a married couple, or one or both parents with one or more children. Sometimes the family is more extended, and includes grandchildren, aunts and uncles, or cousins. The operation may be organized as a corporation, an LLC, or a partnership. Often there is no written agreement and no separate tax return filed, but the operation consists of a pooling or sharing of assets, income, and resources.

    As with any business matter, it is important to identify the true client as early as possible. This is not always easy to do, though, until the goals and facts are known. For example, a family farm LLC may need legal representation if it is to proceed with a bankruptcy reorganization. On the other hand, if it is determined that a reorganization is not feasible, the LLC will not need representation, but its individual members likely will.

    Besides the usual co-debtors and guarantors which are required by lenders, farm families often pledge additional collateral for an enterprise of which the owner is not a member or shareholder. After all, that is what families do.

    Representing More than One Family Member

    It is often permissible under our Supreme Court Rules to represent more than one member of a family in a financial distress situation. Make certain to fully comply with the rules, including consultation, explanation, and informed consent. And put it all in writing.2

    Be sure to explain that the rules in bankruptcy are stricter. Avoid later surprises.

    In fact, put as much as you can in writing, commemorating all the important points of your initial and subsequent meetings, strategies, and decisions. Remember, for the farm family this is their business and their way of life.

    Early-morning Emails

    These farm families are under a great deal of stress. I know they are up at night worrying because I see the emails they send at 2:40 a.m. or 3:15 a.m. Having your plan, and the reasons behind that plan, in writing might better allow them to reread and revisit your advice. They need their sleep. They work seven days a week to provide us with quality food.

    What’s your idea to help family farmers cope? Please let me know – I can be reached at (608) 258-8555 and at com jdkrek ks-lawfirm ks-lawfirm jdkrek com.

    Endnotes

    1 To qualify, the family must provide proof of continued ownership of the farm for 100 or 150 years, respectively. See the Wisconsin State Fair’s Century or Sesquicentennial Farm & Home Program website.

    2 See SCR 20:1.7 Conflicts of interest current clients.

    This article was originally published on the State Bar of Wisconsin’s Agriculture Law and Rural Practice Blog of the Solo/Small Firm & General Practice Section. Visit the State Bar sections or the Solo/Small Firm & General Practice Section web pages to learn more about the benefits of section membership.





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