Chapter 12 in Arkansas: Why Bankruptcies Are Rising So Fast

What is happening to Arkansas farmers is what is taking place in other states, too. But it is happening more often in Arkansas than most others. Financial pressures have pushed up Chapter 12 bankruptcy filings across the country. But those filings are rising faster in Arkansas.

Dr. Ryan Loy, an agricultural economist at the University of Arkansas, has been getting a lot of calls these days since agricultural insiders know that he closely tracks bankruptcies. Loy wants them to know something: the real numbers for Chapter 12 bankruptcies are probably worse than what he can discuss right now.

“Any numbers that I'm reporting,” Loy told American Farmland Owner from his office in Little Rock, “I'm likely understating them.”

Chapter 12 bankruptcy is a process that can take time. Some farmers straining under unsustainable economic weight aren’t yet reflected in the most recent bankruptcy filings, Loy believes.

Dr. Ryan Loy bio:

Assistant Professor -- Extension Economist for the University of Arkansas Division of Agriculture

BS, MS, and PhD -- Oklahoma State University

Specialties -- agricultural finance, farm management, supply chain resilience, and value-added marketing channels

“Morning Coffee and Ag Markets Podcast” --Co-Host

Explaining the Spread of Chapter 12 Bankruptcy Filings

Loy has devoted his professional career to making sure people understand the whole picture. That mission followed him from Plano, Texas, where he grew up, joined FFA, and realized that too many people – including himself – didn’t understand enough about agriculture.

Years later, fishing and hunting made Arkansas a fit for his recreational commitment to the outdoors. But it is his professional role at the University of Arkansas where he finds the continuation from his early FFA days.

Loy works with farmers to solidify their finances and that enables him to expand their knowledge of the challenges of the industry. Bankruptcies are becoming a more prominent challenge.

Chapter 12 Bankruptcy Offers Farmers a Path to Survival

“Chapter 12 is voluntary,” Loy said. “…to restructure debt under $12.5 million. So, these are folks who are still farming, still want to farm. The whole goal of Chapter 12 is to make sure that you can sustain and stay in business.”

Chapter 12 aims to give farmers the lifeline to keep their operations going after the strains of financial hardship rather than Chapter 7, which puts the farm in full liquidation. The rise in Chapter 12 filings suggests a growing number of farmers are under immense financial stress.

Arkansas Farm Bankruptcies Increase to Highest Levels This Decade

In the most recent data from April 2024 to March 2025, Arkansas recorded 15 Chapter 12 farm bankruptcies, a return to pre-COVID levels not seen since 2020 (14) and 2019 (13). Loy’s research shows that Arkansas hasn’t had this many Chapter 12 filings since 2017 when there were 18.  

These are notably higher than the years that followed the pandemic, when government assistance helped soften the blow. “2022 was eight, 2023 was three, and 2024 was ten,” Loy noted.

While it may be too early to call it a long-term trend, the spike is alarming.

The Return of Pre-COVID Economic Pressures

The reasons behind the rise are complex, but they echo issues farmers faced before COVID-19.

“The commodity prices they’re getting paid are not justifying the input costs. And it’s not the farmers' fault. If it doesn’t pencil, it doesn’t pencil,” he said.

Despite efforts to pre-book, market effectively, and budget carefully, many Arkansas producers are finding themselves upside down financially. These economic pressures have returned with vengeance, particularly as federal pandemic-era support programs have wound down.

RELATED: This American Farmland Owner report shows the factors behind the rise in farm bankruptcies nationally.

Arkansas Farmers’ Unique Challenges 

Arkansas’s situation is made more challenging by the region’s unique set of risks compared to some other agricultural states. The state falls under the 8th U.S. Circuit Court, which includes Missouri, Iowa, Minnesota, and South Dakota. Of those, Arkansas is the only Southern state, and that matters.

“The Midwest faces an entirely different set of risks than we face,” Loy explained. “Whether it’s weather, the type of crops we grow, the farmland that we have…it’s just much different. Not saying it’s better or worse, but it’s different.”

Southern producers might deal with more extreme weather variability and different crop systems.

“Everything that could go wrong on a farm will go wrong on a farm in the South,” Loy said. “And again, everybody can do everything they’re supposed to do correctly, and sometimes it’s just out of their control.”

RELATED: This Arkansas thought leader was focused on the increase in political attention to limit Chinese ownership of farmland before many others were.

Export Markets Adding Pressure to Arkansas Producers

One of the root causes that Loy pointed to is the weakening trade market. “It boils down to our export markets and our import markets,” he said.

Arkansas farmers are no strangers to adversity. But the recent uptick in bankruptcies signals systemic issues that go beyond individual management. As Chapter 12 filings rise, the question becomes not just how to help farmers stay afloat but whether the current model can support long-term viability.

“If it doesn’t pencil, it doesn’t pencil,” Loy reminded.