Bankruptcy Is The Only Option for Some Ethanol Producers In The U.S.

14 Nov Bankruptcy Is The Only Option for Some Ethanol Producers In The U.S.

The ethanol industry is America is struggling with low fuel prices resulting in bankruptcies across the industry. The EPA is also considering asking Congress to remove the ethanol mandate fuel contain 10% ethanol. Most of the companies are filing for chapter 7 bankruptcy, since their debt exceeds their assets. The struggles with ethanol producers hits Minnesota especially hard given the states corn production and ethanol industry.

If you are a corn farmer and have sold product to a bankruptcy ethanol producer, you may be in line for a preference claim from the bankruptcy trustee. A preference claim attempts to reclaim money paid to the farmers for their corn crop and then uses those funds. A bankruptcy trustee has the power to get monies paid to farmers in the 90 days before bankruptcy by the bankruptcy company. This is call a preference and it is meant to repay all creditors in a bankruptcy equally. This means that the farmers are considered creditors and they received a higher percentage of repayment from the bankrupt entity, and the trustee is attempting to make the distribution of money more equal. This can present a hardship for the farmers who have to repay for corn that they have already sold, and the preference does not take the cost of producing the corn into account.

The good thing if you are a farmer or anybody hit with a preference suit is that you have defenses to the trustees suit. The most common defense raised is that you sold the corn in normal course of business. If you are sued by a trustee for a preference for any matter, it is important to talk to an attorney to determine what defenses may be available to you, and to determine how much you may owe the trustee. If you have been sued or received a letter regarding a preference claim, you can contact our office on how to proceed.