Iowa State officials are working to reinstate the Chapter 12 bankruptcy law, a provision designed to help assist local farmers who are battling the farm crisis.

The federal bankruptcy provision expired Sept. 30.

Neil Harl, professor of economics, and other ISU officials have been researching Chapter 12 over the past few years. He said Chapter 12 was introduced in the mid-’80s because of the inadequacy of earlier bankruptcy laws.

Harl said the preceding law, Chapter 11, was not working because it was difficult for farmers to get confirmation by the courts, and their farms were frequently liquidated by creditors.

A later law, Chapter 13, also created a problem because the debt limitations were too low, he said. Chapter 12 seemed to help family farmers when other options did not work.

“Chapter 12 was a bankruptcy tool for farmers,” said Scott Hippen, an Ames lawyer who did his graduate work with Harl in 1994. “Without it, this tool will be gone.”

Harl agreed Chapter 12 is crucial for farmers.

“If Chapter 12 is not extended, farmers will have little options. Most will try the Chapter 11 and Chapter 13 bankruptcy laws,” Harl said.

According to a press release, Chapter 12 was started in 1986 for an initial seven-year term. In 1993, Chapter 12 was extended for five more years.

“[Chapter 12] was viewed as a temporary plan for bankruptcy,” Harl said.

Harl said Congress included the reinstatement of Chapter 12 into the Bankruptcy Reform Bill, but because of problems related to consumer bankruptcy, it did not pass.

“Just this morning, I talked to government officials about trying to get Chapter 12 into a speeding bill to avoid a government shutdown — or at least an extension,” Harl said.

Harl said in 1994, the researchers located farmers who had filed for Chapter 12, and 85 percent were still in farming and/or owned farmland.

Hippen said his task was to locate the original farmers who had filed for Chapter 12 and find out if they were still in farming or owned farmland.

“The majority of farmers said that Chapter 12 was helpful,” Harl said.

Harl said the two studies made ISU the first agency to conduct research about the success of bankruptcy laws.

Harl said ISU continues to publish articles concerning the need for Chapter 12.

“I believe that Chapter 12 is a highly important part of the bankruptcy laws,” Harl said.