MEMORANDUM

TO: Brady Williamson

CC: Professor Elizabeth Warren
Professor Lawrence P. King

FROM: Elizabeth I. Holland

DATE: August 19, 1997

RE: Raising Eligibility Limit in Chapter 12, Proposal #3

The following information has been prepared in response to your request for more information related to the proposal to raise the chapter 12 debt eligibility ceiling to $2.5 million dollars. The data was obtained from Jim Ryan, an economist with the Department of Agriculture.

There are approximately 2 million family farms in the United States. [ FN: A "family farm " was defined in the search as all farm operations excluding nonfamily corporations and cooperatives. As a result, the search results may be over inclusive of those family farm operations that do not meet the income and ownership requirements of section 101(18).] Of these two million family farms, 99.81% have debt of $1.5 million or less; .12% have debt between $1.5 million and $2.5 million; and .07% have more than $2.5 million in debt.

The .12% of family farms that have between $1.5 and $2.5 million in debt represent approximately 2,436 family farms. These are the family farms that would be affected by the chapter 12 debt ceiling proposal.

While fewer than 2,500 family farms would be affected by the proposed change, these operations owe over $4.5 billion dollars, which accounts for over 4% of all reported farm operation debt. It is important to note that these family farms represent a disproportionate amount of total outstanding farm debt.

The data obtained from the Department of Agriculture does not indicate the relative financial strength of these family farm sectors. Historically, however, highly-leveraged family farming operations have been hardest hit by adverse growing conditions and weak economic environments.