“The One” That Got Away

A Los Angeles megamansion once expected to list for $500 million has sold at a bankruptcy auction for $141 million. While Milwaukee’s real estate market isn’t as hot as LA’s, the entire saga provides an interesting look at the bankruptcy process. Hanson & Payne has been involved with several similar but smaller bankruptcy cases like this in our area

One Of A Kind

When he started building The One more than a decade ago, developer Nile Niami planned for it to be one-of-a-kind. He bragged that it would be the most expensive home in the world.

The compound sits on 3.8 acres, and has 360-degree views of the Pacific Ocean, downtown Los Angeles and the San Gabriel Mountains. According to the listing, there is 105,000 square feet of living space, which includes 21 bedrooms, 42 bathrooms, and 7 half-baths. There is also a nightclub, a juice bar, a full-service beauty salon, a wellness spa, a tennis court, a home theater that seats 40, a bowling alley, a 10,000-bottle wine cellar, 30-car garage, and a 400-foot private outdoor running track. The property features seven water features, including a massive moat that runs around the property.

It truly is one of a kind. And there will never be another home like it built near LA, which has changed its property laws to prevent similar developments from cropping up. 

One Major Headache 

Delays and disputes dramatically increased the cost of building The One. 

The developer originally wanted to list it for $500 million. However, his debt on the property ballooned to more than $190 million. The property was placed into receivership and then went into bankruptcy. As part of a bankruptcy agreement, it was listed for $295 million and, when no buyer emerged, it was put up for auction.

It sold for $141 million. This makes it the third most expensive home ever sold in Los Angeles. It’s behind the Jack Warner Estate (as in Warner Brothers) bought by Amazon’s Jeff Bezos for $165 million, and a Malibu compound that sold for $177 million last year. 

The selling price is also “about $60 million less than the total debt on the house, meaning several lenders may still end up losing money on the home. The biggest lender was Los Angeles subprime lending magnate Don Hankey, who loaned more than $125 million to the project. People familiar with the sale said Hankey, who could have used his loan to “credit bid,” was not the final buyer.”

This is not an unusual situation. Properties that sell at bankruptcy often go for less than they would on the open market. 

One For The Road

Though the house has been sold, there are still a number of issues that the new owner will need to spend money addressing. CNBC says, “According to the receiver’s report and an engineering study, the house has cracks in and around many of the pools and stonework, as well as signs of mold. It has several outstanding building and occupancy permits, and a local homeowner’s association is challenging its construction.”

One-Stop Shop

Hanson & Payne LLC is a full-service bankruptcy law firm in Milwaukee. We have worked with developers, lenders, and property buyers in the Milwaukee area when their properties are put into receivership or someone involved in a project files for bankruptcy. Our experienced team of attorneys are “the ones” you should reach out to if you have questions about real estate transactions and bankruptcy.

A Return To Rigidity? A Look At Commercial Lending Post-Pandemic

Since the beginning of the coronavirus pandemic, commercial lenders have been more willing than ever before to give borrowers some grace when they fall on hard times. But that willingness to be flexible is decreasing by the day. 

The Hanson & Payne team is working with commercial lenders and borrowers in the Milwaukee area as they try to navigate the shifting financial landscape. 

FDIC Encourages Flexibility A Return To Rigidity? A Look At Commercial Lending Post-Pandemic 

One of the big reasons banks have been so willing to work with borrowers over the past two years is because the FDIC told them to. 

As the FDIC says on its website:

Just days after the World Health Organization formally declared a global pandemic, we issued a statement acknowledging that this unique and evolving situation could pose significant temporary business disruptions and challenges, and encouraging financial institutions to work with customers and communities affected by COVID-19. Specifically, we stated that an institution’s prudent efforts to modify the terms on existing loans for affected customers would not be subject to examiner criticism. We committed to working with affected financial institutions to reduce the burden when scheduling examinations, including making greater use of off-site reviews, consistent with applicable legal and regulatory requirements.

We have encouraged banks to work with all borrowers, especially those from industry sectors particularly vulnerable to economic volatility. We have clarified that prudent efforts to modify the terms on existing loans for affected customers will not be subject to examiner criticism and that certain loan modifications made in response to COVID-19 are not troubled debt restructurings (TDRs). We have also provided flexibility to enable mortgage servicers to work with struggling consumers and to allow for delayed receipt of required appraisals for certain residential and commercial real estate loans.

These are just a summary of the specific directives released by the FDIC, but it is clear that banks were supposed to be much more flexible than usual. 

And they were. Over the past two years, Hanson & Payne has worked with banks and borrowers to renegotiate or restructure a lot of debt and make sure everyone’s interests are protected when new documents memorializing these agreements are drafted. 

What Comes Next? 

The big question everyone is asking now is what comes next? Pandemic guidance is going to go away at some point. However, in the face of inflation, banks may want to continue being flexible in order to attract borrowers. 

On the other hand, banks can’t be too generous lest their portfolios appear rosier than they actually are. This could destabilize the financial system more than the pandemic and the uptick in inflation already have. 

Milwaukee Area Bankruptcy Attorneys You Can Trust

Come what may, the Hanson & Payne team is always ready to assist Milwaukee area borrowers and lenders. Our experienced team of attorneys can assist with restructuring and workouts, or help guide our clients through the bankruptcy process. Please contact us today to schedule an initial consultation.

Drastic Times, Drastic Measures?

A recent article published by Kiplinger warns that “a wave of bankruptcies and foreclosures appears to be building.” The author says that the combination of covid, inflation, supply chain issues, and a workforce that is demanding more flexibility, has created a perfect storm. 

The Hanson & Payne team has noticed the confluence of these events as well. We, however, are a bit more optimistic than the author about what the future holds. Wisconsinites, and Milwaukee area residents and businesses, in particular, are a resilient and resourceful bunch. 

Time To Take Action? 

The author suggests that everyone should be taking evasive action to avoid the predicted financial crisis:

For homeowners, interest rates will almost certainly increase in the near future.  If a homeowner can refinance his or her mortgage to take advantage of the current low-interest rates, that course of action should be considered.

For consumers, accelerating the timing of any major purchases will make sense since the looming inflation will make the dollar worth less and less and make the effective cost of an item more expensive as time passes. Individuals should also consider exiting the stock market or minimizing their stock portfolios as soon as possible. Conversion of stock to cash is not a good strategy during a time when the value of the dollar will steadily decline. Conventional wisdom dictates that investment in precious metals, such as gold and silver, is a safe harbor.  Thus, selling stock and buying gold and silver makes sense.

Business owners should analyze their businesses based on the assumption that the near future will bring high inflation, high interest rates, and a continuation of supply chain disruption.  It is prudent to take steps to restructure the business in a way that will mitigate the damages if those future assumptions come to pass.  

Whether you should follow this financial advice depends on your specific situation. Nobody can predict the future, and even authors in respected publications like Kiplinger can only speak in generalities. The same is true of sources giving out information on bankruptcy. 

Generally Speaking, You Need To Know The Specifics 

Whether or not a wave of bankruptcies is coming tells you little about whether you or your business is at risk of being pushed into bankruptcy. Talking through your finances with an experienced bankruptcy attorney like those at Hanson & Payne is the best way to figure out if bankruptcy is in your future. 

You may also choose to file for bankruptcy proactively. Bankruptcy provides businesses an opportunity to retool and refocus. It can head off emerging issues before they become big problems by giving the filer much-needed flexibility. 

If you are worried about your finances or have questions about bankruptcy, the Hanson & Payne team is here for you. We are Milwaukee-based attorneys who have decades of experience helping Wisconsin businesses and families secure their financial futures. Please contact us today to schedule a meeting. 

And You Thought Things Couldn’t Get Any Worse

Do you remember that Tom Hanks movie from the 1980s where he and Shelley Long buy a beautiful looking house only to find out it is, as the movie’s title suggests, “The Money Pit”? The front door comes off its hinges, staircases tumble down, and a bathtub even falls through the floor. Just when they think they have identified everything that is wrong, something else breaks. 

The parade of errors is funny, but also a good reminder that there’s no limit to bad luck. Just because things have been going poorly doesn’t mean they have to start turning around. Often, you need to take action to make things go your way. For many of Hanson & Payne’s clients, filing for bankruptcy is that self-initiated inflection point. 

Many Milwaukee area residents and businesses use the bankruptcy process to help get their finances under control and move forward. Unfortunately, filing for bankruptcy is no guarantee that your luck is going to change. 

File Soon, But Not Too Soon

Bad things can and do happen to people after they have filed for bankruptcy. That’s why it is important to figure out when filing for bankruptcy will work best for you. You should do it soon enough that it can help you salvage what you still have. But not too soon. You don’t want to risk your financial situation getting a lot worse after your case is filed. 

While bankruptcy can help you deal with debts that have already accumulated, it typically cannot help with financial issues that arise after the case is filed. 

What About Post-Petition Debt?

The debt you have before your case is filed is called “pre-petition debt.” The bankruptcy process is designed to deal with this debt. 

Debt that you incur after your case is filed is called “post-petition debt.” Most post-petition debt cannot be addressed in a pending bankruptcy case. However, there are some exceptions to this rule. 

First, some Chapter 13 petitioners may be able to have post-petition debt included in their existing bankruptcy repayment plan if the court okays it. Whether this is allowed depends on the type and amount of debt, and sometimes, the judge. 

Second, if you have filed for bankruptcy under Chapter 13, you can request that your case be converted to a Chapter 7 case. If your case is converted, you should be able to include new debts in it. 

If you have questions about post-petition debt or any type of debt, Hanson & Payne’s experienced team of bankruptcy attorneys is here for you. There are tactics that can be used to reduce or help you manage post-petition debt even if it cannot be forgiven. 

Milwaukee Area Bankruptcy Attorneys You Can Trust

At the end of “The Money Pit,” Hanks and Long’s characters have everything fixed up, and the possibility of a happily ever after. With some help and hard work, they dug themselves out of the pit. The same thing is possible for Milwaukee area residents who find themselves in a financial hole. Hanson & Payne is an experienced bankruptcy firm that can help you when everything seems to be going wrong. Please contact us today to schedule a meeting.

A Titan Of The Tech Industry Who Called Milwaukee Home

It is not too often that the death of a Milwaukee citizen makes national news, but John C. Koss deserves every ounce of ink spilled about him. Koss and a friend invented stereo headphones, revolutionizing the way we listen to music. Milwaukeeans know him for his charitable work, and the humorous billboards the Koss company put up around town. What many people may not know is how he stepped up and led his company through the Chapter 11 bankruptcy process

According to his obituary in the New York Times, “Koss and his friend Martin Lange Jr., an engineer, developed a portable stereo phonograph in 1958 that they called a ‘private listening station.’ It had a turntable, speakers, and a privacy switch that let users plug headphones into a jack. But most of the headphones available, like those used by telephone operators, shortwave radio users, and pilots, were incompatible and not stereophonic. So they rigged up cardboard cups that contained three-inch speakers and chamois pads from a flight helmet, and they attached them to a headband made of a bent clothes hanger covered with a rubber shower hose.” 

The private listening station didn’t take off, but Koss headphones became the industry standard. They were even used by the members of the House Judiciary Committee for listening to the White House tapes during President Richard M. Nixon’s impeachment inquiry. 

In the 1980s, Koss brought in a professional manager to help grow the company. The manager diversified the product line and moved production offshore, but instead of growing, things fell apart. The professional manager left after his five-year contract was up, and Koss retook the reins. Eventually, the company had to file for Chapter 11 bankruptcy. 

In a 1988 interview with Inc. magazine, Koss said about his company’s bankruptcy, “I felt awful … My board had agreed, my family had agreed, but I was the guy who had to sign the papers. I just walked around in a daze, angry at myself.”

Two years later, in a follow-up interview, he elaborated a bit more on how bankruptcy impacted him.

INC.: Does it cost you anything in your head, your heart, or your gut to file bankruptcy?

KOSS: It costs a lot. The guy who starts the business never thinks it’s going to fail. That is why most bankruptcies are too little, too late. People wait too long, thinking something will happen at the last minute. Somebody has to be objective for you in your organization. If you are an entrepreneur, that person has to tell you, We’ve got to stop here, or there will be nothing left. I don’t think the fellows in Chicago who became our lead bank realized that they weren’t dealing with a man and a business; they were dealing with a man and his life’s work — not only my life’s work but my wife’s and the five kids’. What were we going to do, take something we had spent all our lives developing and just throw it away? Or were we going to fix it? It was never a question of whether we were going to turn it around, just when.

INC.: So it was more than a business issue for you?

KOSS: Yes, it was the family, the lifestyle, the whole thing. It wasn’t just deciding with your wife that, gee, the business has come to the end, so we’ll let it go and do something else. This was an exciting life’s work…. Signing those Chapter 11 papers was hard — especially because of my age. I’m from a generation where you never did that.

INC.: How did you reconcile this bias you had against bankruptcy in light of having to file for one yourself?

KOSS: I talked to a lot of people, including some friends who had gone through it. One friend gave me very good advice. He said: “When you do this, you’ll want to hole up at home. You won’t want to talk to anybody or see people. You’re going to feel like a beaten animal. Don’t do any of that,” he warned me. He said it would eat me up from the inside, and I’d die from it.

…The first night I stayed in and sat with my wife. It was on the television, and of course, I had called a few friends to let them know it was coming. The next day, though, I went charging into the office with a very positive attitude because we were going to get through this thing. We were sharing information about what was going on with our employees and everybody else.

Another friend told me that there’s another reason that you don’t go into hiding. The reason is that a lot of people out there want to help you.

INC.: Is failure — to the extent that bankruptcy is seen as failure — a culturally acceptable event?

KOSS: Failure is when you join the turf club. Anything else is an experience that didn’t work out too well. Bankruptcy is a tool. If you try your best and you’re an ethical and honest businessman and circumstances work against you, the tool is there to give you a chance to start over. We started over, and my God, look at all the jobs and the families we saved.

This is a refreshingly honest look at how difficult it is to file for business bankruptcy when your business is very much an extension of yourself. But as Koss said, sometimes circumstances work against you, and you need to use the tools available to turn things around. Bankruptcy is that tool, and using it is nothing to be ashamed of. 

Rest in peace, Mr. Koss. Thank you for everything you did for Milwaukee, and the music you brought to the world. Contact our team today.

Wisconsin Lawyer Finds Out Not All Debts Are Dischargeable

Getting a fresh start is one of the many benefits of filing for bankruptcy. However, not all debt can be wiped away by the bankruptcy courts. A Wisconsin lawyer just found this out the hard way after an appellate court ruled he is still on the hook for a penalty he was assessed during a disciplinary case

In 2009, Wisconsin lawyer Tim Osicka was disciplined by the Wisconsin Office of Lawyer Regulation (OLR) for “failing both to respond to client grievances and to cooperate with an investigation into his work for those same clients.” This was not the first time such complaints had been levied against Osicka, so the OLR recommended a temporary suspension of his law license and required him to pay $150 to the client he wronged and $12,878.14 to cover the cost of the disciplinary proceeding. 

Osicka appealed to the Wisconsin Supreme Court, which “reduced Osicka’s suspension to a public reprimand but upheld the restitution and the cost order, reducing the number of costs to $12,500.64. When Osicka failed to pay the costs by the prescribed deadline, the State Bar of Wisconsin suspended his license.”

In 2011, Osicka closed his law practice and filed for Chapter 7 bankruptcy

Chapter 7 bankruptcies are known as fresh start bankruptcies because the court wipes away your debt, and you walk away with a clean slate. However, there are certain debts that the bankruptcy court cannot forgive. 

Some common forms of nondischargeable debt are:

  • Tax debts
  • Child support, alimony, or other family support obligations
  • Debts that are tied to a legal judgment like a personal injury lawsuit
  • Student Loan debts, except in cases of undue hardship
  • Fines for violating laws
  • Debts that you forget to include in your bankruptcy application

Osicka assumed that the $12,500.64 he was ordered to pay the OLR was discharged in his Chapter 7 case. However, when he petitioned the Wisconsin Supreme Court for reinstatement to the bar, OLR said it would not recommend reinstatement unless he paid the $12,500.64. 

Osicka appealed, and the case went all the way up to the United States Court of Appeals for the Seventh Circuit. The court determined that federal bankruptcy law prevents the discharge of debts that are a “fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss, other than a [particular] tax penalty.”

The court then considered the nature of the $12,500.64 Osicka owed the OLR. Although the amount is tied to the cost of the disciplinary proceeding, the court found that it was imposed as a penalty. Other courts across the country have ruled similarly. 

If Osicka wants his law license back, he is going to have to pay up, despite having filed for bankruptcy. 

This case is a good example of why the Hanson & Payne team always advises our Milwaukee area clients on the pros and cons of filing for bankruptcy and walks them through different possible outcomes. Some debts you might assume will be forgiven won’t be. In other cases, assets our clients thought they would have to give up were saved and used to start over with. 

Bankruptcy law is nuanced and doesn’t always work the way you might expect it to. It is important to contact an experienced bankruptcy attorney like those at Hanson & Payne when you are deciding if bankruptcy is the right option for you.

3 Ways Bankruptcy Could Impact Your Kids

If you are like most parents, you worry about how the choices you make will impact your children. You want what’s best for them, even if it makes your life a bit more difficult. As parents ourselves, we get it. That’s why we are not surprised that many of our Milwaukee area clients ask us how filing for bankruptcy will impact their kids. 

The answer to that question is every lawyer’s favorite answer: it depends. Families in financial distress typically find themselves in a better situation after filing for bankruptcy, which is good for the kids. However, there are a few things you should consider if you have children and are considering filing for personal bankruptcy. Here are X of them. 

  1. Child Support Payments Will Not Be Impacted 

The bankruptcy court is not a family court, and will not make changes to child support payments. If you currently receive payments, you should continue to do so. If you currently make child support payments, you must keep paying. 

Back due child support is not dischargeable in bankruptcy. Debts that are “in the nature of support” — like medical expenses, educational expenses, etc. — are also excluded from the bankruptcy discharge.

If you liquidate assets to pay off debts, your child support obligations will be at the front of the line of creditors. If you file for bankruptcy under Chapter 13, the court will not approve your repayment plan or grant a discharge unless you are current on your payments. 

  1. Your Childrens’ Bank Accounts Are Usually Safe 

If you have opened a bank account in your child’s name, the bankruptcy court may pull any money in that account into the bankruptcy estate and use it to pay off debts. However, you may be able to keep this from happening by using an exemption depending on the amount of money in the account and your available exemptions. It is important to note that transferring money to an account set up in your child’s name shortly before filing for bankruptcy is frowned upon, and the money may be pulled into the bankruptcy estate even if you could otherwise exempt it. 

If your child’s account is an educational savings account created under section 529 of the Internal Revenue Code, the money in that account will not be pulled into the bankruptcy estate. The same goes for money that is being held in trust for your child. So if you are the custodian of a bank account set up under the Uniform Gifts to Minors Act or the Uniform Transfers to Minors Act, that money is safe because it legally belongs to your child. 

  1. Applying For Student Loans 

You are probably aware that filing for bankruptcy makes it difficult to get access to credit. Parents who know their families will need to take out student loans for their children to go to college are often very worried about the impact bankruptcy might have. 

The good news is your child will not have a bankruptcy on his or her credit report because you filed for bankruptcy while he or she was a minor. He or she can apply for student loans independently, and be judged on his or her own creditworthiness. Your bankruptcy will not impact your child’s ability to obtain need-based financial aid such as Pell Grants and Stafford Loans.

Unfortunately, if your child needs additional funding, you may not be able to qualify for a PLUS Loan or Graduate PLUS Loan to help them. However, depending on your credit history and score, you may not have qualified for these loans anyway. 

Milwaukee Area Bankruptcy Attorneys You Can Trust 

If you’d like to know more about how filing for bankruptcy could affect your children, don’t hesitate to ask one of the experienced attorneys on the Hanson & Payne team. Contact us today to schedule an initial consultation.

Commercial Landlords’ Pandemic Preference Defense

The pandemic has changed a lot of things, and commercial real estate is one of them. Many retail locations are struggling to stay open, and offices are reducing their footprints as workers continue to stay home, but the demand for warehouse space is way up. It is going to take a long time for the industry to get back to the way things were, or adjust to the new normal.

In order to give commercial landlords some flexibility while things shake out, Congress passed a temporary change to the preference defense law as part of the Consolidated Appropriations Act of 2021 (CAA). Over the past year, Hanson & Payne has advised several commercial landlords and lessees in the Milwaukee area who have benefited from this legislation.

An Incentive To Negotiate 

The new law, section 547(j) to the Bankruptcy Code, incentivizes landlords to be flexible and provide payment deferments to their tenants by eliminating the fear that payments eventually made will be clawed back as preferences if the tenant ends up filing for bankruptcy. 

Under Subsection 547(j), the trustee is prevented from recovering the following payments made before the bankruptcy as a preferential payment:

  • “payment of rental arrearages” in connection with an “agreement or arrangement” made between a commercial landlord and tenant on or after March 13, 2020 “to defer or postpone rent and other periodic charges” and
  • “payment of supplier arrearages” in connection with an “agreement or arrangement” made on or after March 13, 2020, between a company and a “supplier of goods or services to defer or postpone the payment of amounts due under an executory contract for goods and services.”

Is It Working? 

These provisions have been in place for around a year now, and we are starting to see them make a difference in the Milwaukee area. They seem to be doing what Congress intended — allowing commercial landlords to work with lessees who are struggling to make payments due to disruptions caused by the pandemic (including supply chain disruptions and shifting consumer behaviors). When lessees do end up filing for bankruptcy, landlords are successfully using this new preference to hold on to the money they were paid in the last few months.

A Temporary Fix

Unless it is extended, this new preference defense is set to expire on December 27, 2022. Landlords need to keep this in mind as they negotiate with struggling lessees. 

It is possible that the expiration date will be extended since the impact of the pandemic is ongoing, but there are no guarantees. 

Landlords should consider what other preference defenses might be available to them, and structure their relationship with troubled tenants in order to take advantage of them. 

Experienced Milwaukee Bankruptcy Attorneys You Can Trust 

Hanson & Payne’s experienced team of bankruptcy attorneys is helping debtors and creditors in the Milwaukee area navigate the financial storm brought on by the pandemic. Our familiarity with the Milwaukee area’s commercial real estate market means we are well suited to assisting landlords and lessees who are in financial distress.  Please contact our office today to schedule an initial consultation.

What Happens To Leased Equipment During Bankruptcy?

Many businesses in the Milwaukee area choose to lease equipment rather than purchasing it. The Hanson & Payne team frequently assists our clients as they negotiate equipment lease agreements, extend or modify existing leases, and deal with the issues that arise when a lessor or lessee is in financial distress. 

Most equipment lease agreements are pretty straightforward. The lessor loans out equipment, for a specific period of time, for a set price, to the lessee. A typical contract also covers issues like equipment maintenance and who is responsible for removing and returning the equipment at the end of the lease. 

What is not always covered by the contract, but really should be, is what happens when things don’t go as planned. Specifically, what happens if either the lessor or lessee runs into financial difficulty? 

When Things Don’t Go As Planned

Under a properly drafted contract, the lessor should have the right to terminate the lease and recover its equipment if the lessee fails to make a payment. A properly drafted contract should also protect the lessee if the lessor runs into financial trouble. There is nothing worse than a healthy business being threatened because someone it does business with fails to live up to their end of a bargain. 

If at all possible, an equipment lease should be terminated before a bankruptcy case is filed. Bankruptcy courts will sometimes decide an equipment lease is actually a form of secured financing, and make sorting out who owns and owes what more difficult than it otherwise needs to be in the name of fairness to other creditors. 

Sometimes Bankruptcy Cannot Be Avoided

If either party files for bankruptcy while the equipment lease is still intact, and the court recognizes it is a lease and not an alternative financing agreement, the parties will need to negotiate a path forward. 

When a lessee files for bankruptcy, it typically has the option of assuming or rejecting the lease within 60 days of filing its case. A lessee that assumes its lease must cure any past defaults and prove that it is able to meet its obligations going forward. If the lessee chooses to reject the lease, or cannot meet the requirements it needs to in order to assume the lease, the lessor is entitled to recover possession of its equipment and make a claim for damages.

A lessee may be able to persuade the bankruptcy court to allow it to purchase equipment it has previously been leasing from a bankrupt lessor. It may also seek damages for harm to its business. 

Business-Minded Bankruptcy Attorneys In Milwaukee 

Whether you are a lessor or lessee, you need reliable legal counsel if you are going to enter into an equipment lease agreement. Hanson & Payne, LLC is a trusted advisor to many businesses in the Milwaukee area. We have a reputation for being business-minded in an industry that is often criticized for not understanding that working with an attorney is a means to an end. If you are looking for counsel on an equipment lease issue, please contact us today to schedule an initial consultation.

Badger Herald Highlights Dilemma Faced By Wisconsin Farmers

A recent article in The Badger Herald took a deep dive into an issue that threatens the very identity of the Badger State — farm bankruptcies. As the title of the article suggests, there is enormous pressure in the agricultural industry, and on dairy farms in particular, to “go big or go bankrupt.” 

The article details how the rise of corporate-owned farms and the preference of large food producers to work with a smaller number of larger suppliers is crushing the small family farms that built Wisconsin into America’s Dairyland. 

The Data Shows Dairyland Is In Distress 

The data is quite shocking, even for those of us at Hanson & Payne, who spend the majority of our time working on Milwaukee area bankruptcy cases and keeping up with trends in the bankruptcy system

The article, quoting Family Farm Defenders Executive Director John Peck notes “Wisconsin lost half of its dairy farms since the turn of the century and that large, corporate-contracted factory farms currently control 25% of the market, despite accounting for less than five percent of the state’s dairies. In 1987, the average number of dairy cows per farm was 80. Just 15 years later, that figure reached 275.”

Despite the drop in the number of farms, the amount of milk produced is increasing. “Nationwide dairy production rose by a factor of roughly 100,000 lbs between 2005 and 2018, even as the U.S. lost over 10,000 farms during the same period.” 

Supply And Demand Are Pushing Family Farmers Out Of Business 

An increasing supply drives down the price small farmers can sell their milk for, which puts even more financial pressure on them. “The cost of producing milk in Wisconsin was $22.70 per hundredweight in 2020, yet the price of milk reached as low as 12.95 per hundredweight during the same year.” This is simply unsustainable. 

Experienced Bankruptcy Attorneys Serving Southeast Wisconsin

At Hanson & Payne, we have worked with numerous farmers in Southeast Wisconsin who are trying to figure out how to cope with the challenges facing the dairy industry. We layout all of the options that are on the table, and help our clients select the one that works best for them. 

Whether our clients want to regroup and try to weather the current storm, or sell out and retire somewhere warm, bankruptcy is often the best path forward. Bankruptcy is a tool that can be used to help farmers find their feet. There are even special bankruptcy laws that apply just to farmers. 

Hanson & Payne’s experienced team of Milwaukee area bankruptcy attorneys know how difficult it is to consider filing for bankruptcy when you are a farmer. Farming isn’t just a job, it is a way of life. We understand this, so we work with our farming clients to find an outcome that they are satisfied with on a personal level instead of forcing them to focus solely on financials. If your farm is in financial distress, don’t hesitate to contact us.