Farm Credit distress rules offer borrowers a restructuring path

A new combine can cost $400,000 to $1 million, while diesel alone can consume 2 to 4 gallons per acre for tillage. Farmers also pay for seed across hundreds or thousands of acres, fertilizer, and controls for insects and disease, while irrigation pumps can require more diesel during the growing season.

Those figures are ranges, not averages. They also arrive alongside low commodity prices, reducing farm revenue and leaving less cash for principal, interest and other operating costs. Arkansas led the nation in farm bankruptcies in 2025 and again in the third quarter of 2026, according to a National Agricultural Law Center analysis.

The report uses two different reporting windows. Its 2025 ranking covers a full year, while the 2026 finding covers only the third quarter. The figures provide rankings rather than underlying case counts, farm-level balance sheets, commodity basis, yields or margins, so they cannot establish conditions across every Arkansas operation.

Mary Eichenberger, staff attorney for the National Agricultural Law Center, said: “Agricultural production requires large amounts of capital, leading many producers to borrow money and incur large debts.” She said producers may finance operations through:

• Commercial banks
• Processors
• Equipment dealers
• Input suppliers
• The Farm Service Agency
• The Farm Credit System

Rising input costs, market changes, weather events and disease outbreaks can leave a producer without enough revenue to repay a loan, even after receiving financial assistance. The path from default to collateral foreclosure then depends on the loan, collateral, agreement and lender.

How a loan becomes distressed

The Farm Credit System is the largest agricultural lender in the United States. Its nationwide network includes cooperative banks and institutions established under the Farm Credit Act of 1971.

A borrower who signs a Farm Credit agreement must follow the repayment schedule and repay principal and accrued interest. A missed payment can contribute to a distress finding, although payment history alone does not determine the outcome.

Farm Credit considers a loan distressed when the borrower lacks the financial capacity to pay under its terms and either:

• The borrower shows adverse financial and repayment trends.
• The loan is delinquent or past due under the contract.

One or both conditions indicate a high probability of loss for the lender. A distress finding triggers borrower rights and loan-servicing options. It can also open the path to acceleration, liquidation or foreclosure.

The restructuring route and the 45-day clock

After the farm crisis of the 1980s, the Farm Credit Administration created borrower rights. Those protections remain available until the loan ceases to be distressed or has been liquidated.

Once a lender determines that a loan is distressed, the lender must provide written notice. The notice must state that the loan is distressed and that the borrower may request restructuring.

Restructuring changes the loan terms to make repayment more manageable. Options include:

• Adjusting the repayment schedule
• Changing other loan requirements
• Delaying payments on principal or interest
• Recalculating payments over the remaining loan period through amortization
• Granting other financial concessions

The objective is to restore the borrower’s ability to make payments while reducing the lender’s loss risk.

A lender planning to pursue foreclosure must issue a second notice, known as the 45-day notice. It must explain that the loan may be suitable for restructuring and may face foreclosure if it is not restructured. The notice also provides information about the restructuring process, Farm Credit policies and other borrower materials.

The notice starts the foreclosure clock. Proceedings may begin no sooner than 45 days after the borrower receives it. The borrower then must submit a restructuring plan. Failure to submit one allows the lender to pursue alternative actions, including foreclosure, after the 45-day period.

If a lender denies a restructuring application, the borrower may request review by the Credit Review Committee. If that committee affirms the denial, the lender may proceed with foreclosure.

What does this change for a Farm Credit borrower?

“It is important for Farm Credit System borrowers to communicate honestly and frequently with their lender,” Eichenberger said. “A strong knowledge of an operation’s financial situation can help prevent a loan’s ‘distress’ determination and help to establish a successful loan restructuring plan if it becomes necessary to do so.”

For a producer unable to meet a scheduled payment, the practical answer is to contact the lender before delinquency develops into a distress finding. As of Nov. 10, 2026, early contact may determine whether a manageable repayment schedule replaces acceleration, liquidation or foreclosure.