Protect Yourself from Your Client’s
hese have been par- ticularly difficult times for the Texas agriculture indus- try. Receipts and
Bankruptcy T
resources were devastated by the historic 2011 drought and those con- ditions have lingered in many parts of the state. And those challenges, says Jason Binford, have sown the seeds of bankruptcy. Binford, an attorney and direc-
tor at Kane Russell Coleman & Lo- gan PC in Dallas, says farmers and ranchers who fi nd themselves listed as creditors in a bankruptcy case have advantages over non-agricul- tural creditors — specifi cally, they are protected by the law. “There is special interest legisla-
tion — legislation where Congress has deemed to favor certain credi- tors to get them paid fi rst — because Congress has decided that they are important,” Binford explains. “One federal statute is the Packers & Stockyards Act (PSA). The PSA provides that the bankrupt slaugh- terhouse and other meat purchasers are deemed to hold dollars that the meat producer is owed in trust for the meat producer. It’s a completely
tscra.org
different level of payment than if somebody has an unsecured claim for those trust fund claimants be- cause of that dynamic; the differ- ence between property rights and just being owed money.” The PSA was enacted in 1921 at
a time when most livestock sales were conducted at large terminal markets. It was amended in 1976 after a major beef packer declared bankruptcy and its fi nancier was de- termined to have a security interest in the packer’s inventory superior to that of the ranchers who had sold cattle to the company. The law now provides that live-
stock sellers must be paid in full before any other party with an in- terest in the packer’s “inventories of, or receivables or proceeds from meat, meat food products, or live- stock products” may be paid. Binford says the concept of a
trust fund can be used by claimants in other types of bankruptcies as well. It’s a way for the agricultural producer to receive payment ahead of other classes of creditor, which is important because the bankrupt party or its liquidation typically cannot produce enough money to
January 2015 The Cattleman 77
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