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Bankruptcy Costs Under Chapter 12

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  • Collender, Robert N.

Abstract

Chapter 12 bankruptcy, Adjustment of Debts of a Family Farmer With Regular Annual Income, will expire on October 1, 1993, unless Congress intervenes. Chapter 12 imposes certain economic costs, referred to as bankruptcy costs and considered deadweight losses to the economy. The magnitude of these costs is an important element in the debate to renew or extend Chapter 12. Based on White's model of indirect bankruptcy costs, total bankruptcy costs under Chapter 12 may be between 90 and 100 percent of the value of farm assets at the time of filing. This cost compares with estimates of 54 to 60 percent for farms and other businesses filing for reorganization under Chapter 11 of the U.S. Bankruptcy Code.

Suggested Citation

  • Collender, Robert N., 1992. "Bankruptcy Costs Under Chapter 12," Staff Reports 278629, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uerssr:278629
    DOI: 10.22004/ag.econ.278629
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    References listed on IDEAS

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    3. Haugen, Robert A & Senbet, Lemma W, 1978. "The Insignificance of Bankruptcy Costs to the Theory of Optimal Capital Structure," Journal of Finance, American Finance Association, vol. 33(2), pages 383-393, May.
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