Gov’t-funded support available to help with creditors

The pressure of tight financial circumstances and secured creditors wanting their financial agreements honoured is never a pleasant time for a farmer with a lifetime of effort and investment tied into the business.

There is federal tax-funded assistance that you can draw on, however, in this situation.

From 1986 to 1998 there was federal legislation called the Farm Debt Review Act, which was specifically brought in to help farmers who were attracted to jump into rapidly increasing domestic and world demand for Canadian agricultural products with the related inflationary expansion of commodity prices that went along with it.

Like most bubbles, those prices collapsed in the early 1980s and the indignity was compounded by annualized interest rates blossoming to 24 percent from 10 percent, greatly impacting farm debt.

The government stepped in to protect farmers from foreclosure actions by secured creditors.

Although that act no longer exists, it has been replaced by the Farm Debt Mediation Act (FDMA), which might sound less forceful than the original legislation but it still has sufficient teeth to include limiting secured creditors from forcing foreclosure.

Leverage available to you when a secured creditor decides to move against your property or recovery of debt is the fact that you must be advised by written notice that you have the right to apply for mediation under FDMA. Creditors must do so within a minimum of 15 business days before they take any action against you.

A creditor who doesn’t comply with this requirement will most likely have major difficulties moving ahead with action before the courts.

The system provides a neutral mediator/negotiator and financial adviser to help you navigate your way to mutually beneficial solutions to financial impasses between you and your creditors.

The process is confidential and funded by Agriculture Canada. Once you are qualified for assistance, you will be supplied with an expert financial consultancy service to analyze your situation and attempt to find a pathway to regaining solvency.

Depending on your particular situation, you may gain access to a stay of proceedings against you. If this happens, a guardian will be appointed to represent your assets and in some cases you could be that guardian if all parties agree that mediation is proceeding without objection from the majority of creditors.

If another guardian is appointed, the costs will be absorbed by the FDMA unless the guardian is requested by the creditor. In such case, the creditor pays for the guardian but this happens infrequently.

A stay of proceedings against you may last anywhere from 30 to 120 days, or longer, depending on the nature of the proceedings and the continuance of negotiations to resolve the issue.

There are conditions, however, that would overcome a stay of proceedings, not the least of which are if both sides in the dispute do not negotiate in good faith or the farmer has jeopardized the assets in dispute.

Grant Diamond is a tax analyst in Saskatoon, SK., with FBC, a company that specializes in farm tax. Contact: fbc@fbc.ca or 800-265-1002.

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