PRIA, Government Policy, Made Personal

Summary

When a court approves a Chapter 12 bankruptcy plan, the Secretary must pay any lender with a loan guaranteed under this law, within 3 months, an amount the Secretary estimates equals the lender’s loss under the guarantee. That payment counts toward satisfying the government’s guarantee on the loan. If a lender makes an approved change to a guaranteed loan, the loss for the guarantee is the drop in the loan balance caused by that change. The Secretary will approve such a change only if it lowers the loan’s current value to no less than the larger of (a) what the borrower could reasonably be expected to repay, or (b) what the lender could reasonably expect to recover through bankruptcy or selling the secured property after reasonable costs. This does not stop the Secretary from using shared-appreciation agreements with borrowers under other law.

Title 7, §2005

Agriculture, Source: USLM XML via OLRC

(a)Payments to lenders

(1)Requirement

Within 3 months after a court of competent jurisdiction confirms a plan of reorganization under chapter 12 of title 11, for any borrower to whom a lender has made a loan guaranteed under this chapter, the Secretary shall pay the lender an amount estimated by the Secretary to be equal to the loss incurred by the lender for purposes of the guarantee.

(2)Payment toward loan guarantee

Any amount paid to a lender under this subsection with respect to a loan guaranteed under this chapter shall be treated as payment towards satisfaction of the loan guarantee.

(b)Administration

(1)Loss by lender

If the lender of a guaranteed farmer program loan takes any action described in section 1981(b)(4) of this title with respect to the loan and the Secretary approves such action, then, for purposes of the guarantee, the lender shall be treated as having sustained a loss equal to the amount by which—

(A)the outstanding balance of the loan immediately before such action, exceeds

(B)the outstanding balance of the loan immediately after such action.

(2)Net present value of loan

The Secretary shall approve the taking of an action described in section 1981(b)(4) of this title by the lender of a guaranteed farmer program loan with respect to the loan if such action reduces the net present value of the loan to an amount equal to not less than the greater of— (A)

(B)the greatest amount that the lender of the loan could reasonably expect to recover from the borrower through bankruptcy, or liquidation of the property securing the loan, less all reasonable and necessary costs and expenses that the lender of the loan could reasonably expect to incur to preserve or dispose of such property (including all associated legal and property management costs) in the course of such a bankruptcy or liquidation.

(3)Construction of subsection

This subsection shall not be construed to limit the authority of the Secretary to enter into a shared appreciation arrangement with a borrower, or the terms and conditions which shall be required of a borrower, under section 2001(e) of this title.

Notes & Related Subsidiaries

Editorial Notes

References in Text

This chapter, referred to in subsec. (a), was in the original “this title”, meaning title III of Pub. L. 87–128, Aug. 8, 1961, 75 Stat. 307, known as the Consolidated Farm and Rural Development Act, which is classified principally to this chapter. For complete classification of title III to the Code, see

Short Title

note set out under section 1921 of this title and Tables.

Amendments

1990—Subsec. (b)(1), (2). Pub. L. 101–624 substituted “1981(b)(4)” for “1981(d)”.

§2005 Payment of Losses on Guaranteed Loans