Got Milk? Markets Push More Farmers & Food Processors Into Bankruptcy

The Milwaukee Journal Sentinel reports that sales of milk as a beverage have barely risen since 1985. Part of that is due to increased competition. “Beverage companies, seeking to please a multitude of palates, flooded the market with sports drinks, energy drinks, plant-based sodas, fruit juices and designer coffees… Just in the last half-dozen years, the average grocery store has added nearly 600 new beverage options to its coolers and shelves…” 

The result is a glut of milk and a corresponding drop in milk prices that are driving family farms and food processing companies that specialize in dairy products out of business. 

Wisconsin’s Dairy Herd Dwindles, Farmers Are Filing for Bankruptcy More Often

Numbers released by the Wisconsin Department of Agriculture, Trade, and Consumer Protection showed the Dairy State lost 10% of its herds in 2019 alone. Some farmers are simply closing up shop, while others are being forced to file for Chapter 12 bankruptcy

Chapter 12 is a special chapter of the bankruptcy code that was enacted specifically so that “family farmers” and “family fishermen” can file for bankruptcy without losing all their assets and giving up their way of life.

Chapter 12 bankruptcies are like Chapter 11 or Chapter 13 bankruptcies in that the goal is to reorganize operations and repay debts on a payment plan. However, Chapter 12 is simpler and less expensive to file under than Chapter 11, which was designed with large corporations in mind. Compared to Chapter 13, Chapter 12 is better at dealing with the large debts and less predictable income that characterize family farming and fishing operations.

At Hanson & Payne, we are helping several farming families in Southeast Wisconsin determine what the best path forward for them may be. We don’t push our clients to file for bankruptcy. We lay out all of the available options and discuss the pros and cons so our clients can make the decision that is best for them.

Food Processors Are Also Facing Bankruptcy 

In the last few months, two major milk buyers have filed for bankruptcy — Borden Dairy Company and Dean Foods. As we have often said on this blog, one bankruptcy can often cause a chain reaction. 

The farmers Borden and Dean bought from must now find new buyers. Companies that depended on Borden and Dean products must now find new suppliers. A delay could cause financial distress on either end of that chain. 

If Borden and Dean are unable to make payments to their suppliers, they may end up pushing others toward bankruptcy. 

At Hanson & Payne, we are skilled at working with businesses that have a disruption in their supply or customer chain. If your business is in this situation, we can help you find a path forward. That path does not have to include bankruptcy. Our firm is skilled at negotiating workouts and working with commercial lenders. 

Moo-ving Forward 

The milk market is undergoing a lot of changes right now, but in the long-run, Wisconsin will always be America’s Dairyland. Our firm is ready to help farmers, food processors, and others in the dairy industry move forward and adapt. If you need assistance in this area, please contact us to schedule an initial consultation. 

Shopko Optical Is Thriving Post-Bankruptcy

Shopko stores are gone, there’s no more Shopko gate at Lambeau Field, yet Shopko optical lives on. How is this possible? Dividing up or selling off parts of a business is a common practice in the bankruptcy courts. 

When Shopko filed for bankruptcy last year, its plan was to downsize, reorganize, and regroup while remaining in business. To that end, the company filed for bankruptcy under Chapter 11 of the bankruptcy code

What Is Chapter 11?

Chapter 11 is used by companies who are not ready to throw in the towel just yet. While a Chapter 11 case is pending, a filer has the freedom to attempt to negotiate new contracts with creditors, landlords, and labor unions. It may also settle pending litigation if it is facing unknown liability. The fear that the business will completely shut down if negotiations are unsuccessful gives the filer some leverage and motivates everyone to make a deal. 

Contrast this with a Chapter 7 bankruptcy, where the goal is winding down operations. Assets are sold off, creditors paid whatever is possible, and then the business is shuttered. There is no attempt to keep the business going, even though parts of it might be profitable if they are sold off.

Why Did shopko file for bankruptcy

Shopko was unable to find a way to restructure its business so it could be successful going forward. It’s only choice was to shut down. It ended up being more like a Chapter 7 case than a Chapter 11 case. 

While Shopko as a whole was going through the bankruptcy process, Shopko Optical was spun off as a separate entity. The people who worked in these locations kept their jobs, and the patients kept their access to care. It is a bankruptcy success story. And it is not an unusual one. It is common for bits and pieces of businesses to be bought and sold while their parent company is going through the bankruptcy process. Some businesses will file for bankruptcy just for the flexibility it gives them to restructure in this manner. 

How We Can Help You

Our firm frequently helps Wisconsin business owners sell or acquire a piece of a larger company. We have helped negotiate such sales, and done due diligence checks for buyers, sellers, and commercial lenders. We also have extensive experience protecting the interests of lenders in these situations. At the time a commercial loan is written, we anticipate problems and make sure that the loan documents adequately protect our client in the event its customer falls into insolvency.

Our well-established ability to protect our clients’ interests and keep them informed of what to expect in an insolvency proceeding is what drives businesses and commercial lenders from all over Wisconsin to rely on Hanson & Payne when they find themselves in the unfamiliar territory of a state court receivership or a bankruptcy court. If you are in this situation, we are ready to help. Please contact our office today to schedule an initial consultation.

Negotiate Debt Like A Kid Who Doesn’t Want To Go To Bed

The ability to negotiate is a skill that most of us are born with. If you doubt you were ever a skilled negotiator, think back to the sort of deals you were willing to cut in order to stay up past your bedtime or get something else you wanted when you were a kid. If you are anything like the attorneys at our firm, you would have volunteered to do the dishes for the next month if it meant staying up an extra 15 minutes on Sunday evening. 

Unfortunately, as we get older, negotiating becomes a task we dread, especially when we have to negotiate things like debt. Just hearing the word negotiation probably makes you think of a high-pressure car salesman or that vendor you tried to haggle with at the 7 Mile Fair. 

It is time for all of us to take a step back to the days of our youth and embrace negotiation as a valuable skill. At Hanson & Payne, we often use debt negotiation skills to help our clients avoid filing for bankruptcy. 

The First Rule Of Negotiation

The first lesson of negotiation is one that you understood as a kid — identify something you have that the person you want to negotiate will value. When you were a kid, it was various chores. For creditors, the thing they value most is getting paid, the sooner the better. 

Debt negotiation typically involves offering your creditors a lump sum payment now if they will agree to reduce your overall debt load, decrease your interest rate, lower your monthly payments, or some combination of all of these. 

The best candidate for debt negotiation will have a sufficient cash supply to grab the interest of the creditors, who generally want a single lump sum down payment on the negotiated debt, followed by smaller monthly payments until the negotiated debt is paid off.

If you are a plaintiff in a personal injury action (ex. car accident or medical malpractice action), we may be able to structure a debt repayment plan funded by your award in the personal injury action. 

If you would like to refinance your house to raise sufficient funds to pay your creditors at a discount, we can put you in touch with finance companies that do not charge the painful interest rates most finance companies offer to people who have debt issues.

Negotiate Your debt with The Threat Of Bankruptcy 

Don’t have the cash to make a lump sum payment? Think back to your childhood negotiation tactics. What would you do if your parents wouldn’t let you do more chores in exchange for what you wanted? Resort to threats. 

Creditors won’t care if you say you are going to scream or hold your breath until you pass out, but they may be motivated to cut a deal if they know you are considering filing for bankruptcy. Depending on the type of debt you owe them, they know if you file for bankruptcy they may never get paid back, or will only get pennies on the dollar. 

Contact Hanson & Payne Today

If you are struggling to pay off your debts, and are worried that bankruptcy may be your only option, now is the time to contact Hanson & Payne. Our experienced team of attorneys can take a look at your case and lay out all the options available to you to help you negotiate your debt. Contact us today to day to see if you are a good candidate for debt negotiation.