Your farm is in financial trouble. Crop failure, low commodity prices, equipment breakdowns, whatever the cause, you can’t pay your debts. Your lender is threatening foreclosure. You’re facing bankruptcy. You feel like you’re out of options.
But there’s a federal program specifically designed for this situation. The Farm Debt Mediation Service provides a structured process to work out debt problems with creditors before you lose the farm.
This program has helped thousands of Canadian farmers restructure debt, avoid foreclosure, and save their operations. Let me explain how it works and how you can use it.
What the Farm Debt Mediation Service Is
The Farm Debt Mediation Service (FDMS) is a federal government program under Agriculture and Agri-Food Canada. It’s been operating since 1997, replacing an earlier version from the 1980s farm crisis.
FDMS provides mediation between farmers and their creditors. A government-appointed administrator helps you negotiate with lenders to restructure debt, extend payment terms, or find other solutions.
The program is confidential, relatively inexpensive, and designed to keep farmers farming instead of losing operations to foreclosure or bankruptcy.
FDMS doesn’t give you money. It provides a process and professional help to negotiate with creditors and develop a plan they’ll accept.
Who Qualifies for FDMS
You qualify for FDMS if:
You’re a farmer (individual or farming partnership) who earns at least 50% of gross revenue from farming.
You’re insolvent or about to become insolvent, meaning you can’t meet debt obligations as they come due.
You farm in Canada.
You haven’t used FDMS in the past three years (though exceptions exist).
Both full-time farmers and part-time farmers earning most income from farming can qualify. You don’t need to be in foreclosure yet; struggling to pay debts is enough.
Farm corporations generally don’t qualify, though individual shareholders might qualify for their personal guarantees of corporate debt.
What Debts Can Be Mediated
FDMS can help with most farm debts:
Farm mortgages and land loans.
Operating loans and lines of credit.
Equipment financing.
Supplier credit for inputs.
Personal debts related to the farm operation.
Tax debts to CRA (though special rules apply).
Debts to family members who’ve lent to the farm.
The program works best when most debts are related to the farm. If you have significant non-farm debts, FDMS might not address your full situation.
How to Access FDMS
Accessing FDMS is straightforward. You contact FDMS directly (by phone or online) and request help. That’s it. No referral needed, no application fee, no complex process.
You can access FDMS before creditors start enforcement, or even after foreclosure or collection proceedings have started. The earlier you contact them, the more options you’ll have.
When you contact FDMS, they’ll ask about your situation, verify you qualify, and assign an administrator to your case. This initial contact is confidential and doesn’t obligate you to proceed.
The Administrator’s Role
The administrator is a professional mediator appointed by FDMS. They’re neutral parties who don’t work for you or for creditors.
The administrator’s job is to:
Meet with you to understand your financial situation.
Help you prepare a complete financial statement.
Contact your creditors and arrange a mediation meeting.
Facilitate negotiation between you and creditors.
Help develop a repayment or restructuring plan that works for everyone.
Document any agreement reached.
Administrators are usually accountants, business consultants, or others with financial expertise. They understand farm economics and debt restructuring.
Preparing Your Financial Information
Before mediation can begin, you need complete financial information. The administrator helps you prepare:
A balance sheet showing all assets and liabilities.
An income and expense statement for the farm operation.
Cash flow projections showing expected income and expenses going forward.
A list of all creditors with amounts owing and security held.
Information about any legal proceedings like foreclosure actions.
This financial disclosure is crucial. Creditors need to understand your full situation to negotiate meaningfully. Hiding information or being dishonest destroys credibility.
The Stay of Proceedings
When you request FDMS assistance and the administrator accepts your case, most creditor enforcement actions are stayed (paused) for 30 days.
During this stay period:
Foreclosure and power of sale proceedings are suspended.
Seizures and executions are paused.
Legal proceedings are halted.
The stay gives you breathing room to prepare for mediation without creditors taking action. It’s a critical protection that makes negotiation possible.
If mediation is making progress, the stay can be extended up to 120 days total. If you’re not cooperating or mediation isn’t working, the stay can be lifted.
The Mediation Meeting
The administrator arranges a meeting with you and your creditors. This can be in-person or by conference call, depending on circumstances and distances.
At the meeting:
The administrator presents your financial situation.
Creditors have the opportunity to ask questions and understand the full picture.
Everyone discusses options for restructuring or dealing with the debt.
The goal is to reach an agreement that lets you keep farming while creditors get reasonable assurance they’ll be repaid.
Mediation is voluntary. Creditors aren’t required to attend or agree to anything. But most participate because FDMS provides structure and often leads to better outcomes than foreclosure.
What a Restructuring Plan Might Include
Successful mediations result in plans that might include:
Extended payment terms spreading debt over more years.
Reduced interest rates to make payments affordable.
Payment holidays or interest-only periods while you recover financially.
Partial debt forgiveness if the alternative is bankruptcy where creditors get even less.
Sale of some assets to reduce debt while keeping core farm operations.
Refinancing with different lenders if better terms are available.
The plan needs to be realistic for you and acceptable to creditors. An administrator helps craft proposals that balance these needs.
Getting Creditor Agreements
For restructuring to work, creditors need to agree. FDMS can’t force creditors to accept a plan.
Creditors agree when they believe the proposed plan gives them a better outcome than foreclosure or bankruptcy. The administrator helps make this case by showing:
Your farm can be viable with adjusted debt terms.
The proposed payments are sustainable based on realistic projections.
Creditors will receive more through the plan than through enforcement.
You’re committed and acting in good faith.
Not all creditors always agree. Sometimes majority agreement is enough to proceed, especially if the plan treats all creditors fairly.
When Mediation Doesn’t Work
Not all mediations succeed. Sometimes creditors won’t agree to terms you can meet. Sometimes your financial situation is too far gone.
If mediation doesn’t result in agreement, you’re back where you started. The stay of proceedings lifts and creditors can resume enforcement.
But you’ve lost nothing by trying. FDMS costs you little, and having tried mediation might give you some credibility if you end up in bankruptcy proceedings.
Many farmers use FDMS as a stepping stone. Even if full agreement isn’t reached, partial agreements or information gained helps next steps.
FDMS vs Bankruptcy or Proposal
FDMS is an alternative to bankruptcy or insolvency proposals. It works outside the Bankruptcy and Insolvency Act and has different features.
FDMS advantages:
No bankruptcy stigma or credit report entry.
Confidential process without public records.
Flexible agreements not bound by bankruptcy law requirements.
Less formal and intimidating than court proceedings.
Lower cost than bankruptcy or proposals.
Bankruptcy/proposal advantages:
Legal force to bind non-cooperating creditors.
Stay of proceedings that’s legally enforceable.
Formal discharge of debts.
Protection of exempt assets.
Many farmers try FDMS first, then move to bankruptcy or proposal if FDMS doesn’t work. The processes aren’t mutually exclusive.
The Cost of FDMS
FDMS charges a nominal fee, currently around $200-300. This covers administrative costs but is heavily subsidized by the federal government.
Compared to thousands in legal and accounting fees for bankruptcy or proposal, or tens of thousands in losses from foreclosure, FDMS is incredibly inexpensive.
You might still want professional help (accountant, lawyer) to review any agreement reached. But the mediation process itself is very affordable.
Provincial Variations
FDMS is a federal program operating nationwide, but provincial laws about foreclosure, creditor remedies, and insolvency affect how it works.
In foreclosure provinces like Alberta, the stay of proceedings pauses foreclosure court proceedings.
In power of sale provinces like Ontario, it pauses the sale process.
Provincial programs might exist alongside FDMS. Some provinces have agricultural credit corporations or programs that can also help with farm debt.
Check what provincial resources are available to complement FDMS.
Tax Debts and FDMS
CRA participates in FDMS mediations for farm tax debts. The CRA has specific policies about when they’ll agree to payment plans or reductions.
Tax debts are often subordinate to secured lender debts, so they might be dealt with separately or have different terms in a restructuring.
If CRA debts are a major part of your problem, the administrator will help negotiate with CRA as part of the overall plan.
Family Creditors
Many farmers owe money to family members who helped with land purchases, equipment, or operating costs. Family debts can be included in FDMS mediations.
Family creditors often participate because they want to help you succeed and are willing to be flexible. But they also need to be treated fairly relative to other creditors.
Mediating with family can be emotionally difficult. The administrator provides neutral facilitation that helps navigate family dynamics.
Supplier Credit and Trade Credit
If you owe suppliers for inputs or services, these unsecured creditors can participate in FDMS.
Suppliers want to keep you as a customer, so they’re often willing to restructure payment terms. But they also need assurance you’ll be able to pay for future inputs.
Plans might include paying current input costs in full while restructuring old debts over time. This keeps suppliers willing to work with you going forward.
Effect on Credit Rating
FDMS participation itself doesn’t appear on your credit report. The process is confidential.
But if you’re in default on debts, that affects your credit regardless of FDMS. Creditors might report missed payments or defaults.
Successfully restructuring through FDMS and getting current on payments helps rebuild credit over time, better than foreclosure or bankruptcy would.
Success Rates and Outcomes
FDMS doesn’t publicize specific success rates, but many farmers successfully restructure debt and avoid foreclosure through the program.
Success depends heavily on:
How viable the farm operation is fundamentally.
How realistic your restructuring proposal is.
How willing creditors are to work with you.
How early you access FDMS before the situation is hopeless.
The earlier you contact FDMS when problems start, the better your chances of success.
Using FDMS Proactively
You don’t need to wait until foreclosure is imminent. If you’re struggling to make payments, commodity prices have dropped, or you’ve had crop failures, contact FDMS before creditors start enforcement.
Proactive use of FDMS shows good faith and gives you more options. Creditors appreciate borrowers who address problems early rather than hiding until forced.
Combining FDMS with Other Strategies
FDMS can be part of a broader strategy to deal with farm debt:
Use FDMS to negotiate with creditors while also selling non-core assets.
Restructure debt through FDMS while bringing in a farm partner who invests capital.
Use FDMS to buy time while you arrange refinancing with another lender.
Coordinate FDMS with farm succession planning if transitioning to the next generation.
The administrator can help you think through these strategies and incorporate them into a comprehensive plan.
After the Mediation
If mediation succeeds and you reach an agreement, the administrator documents it formally. All parties sign, and you proceed under the new terms.
You need to comply with the agreement terms. If you default again, creditors will resume enforcement and might be less willing to negotiate next time.
Use the breathing room FDMS provides to address the underlying problems that created debt issues. Restructuring buys time, but you need to improve the farm’s economics to succeed long-term.
FDMS and Farm Succession
If your debt problems are connected to succession planning, FDMS can help navigate the financial aspects.
Maybe the farm can support you but not both you and the next generation taking over. Restructuring debt might make succession financially viable.
Or maybe selling part of the farm to the next generation could raise funds to pay creditors while keeping farming in the family.
The administrator can help think through how debt restructuring and succession planning fit together.
When to Contact FDMS
Contact FDMS when:
You’re struggling to make debt payments on time.
Creditors are calling or sending demand letters.
You’ve received notice of foreclosure or power of sale.
Your operating loan is maxed out and you can’t access funds for inputs.
You’re considering bankruptcy because you see no other option.
Don’t wait until the situation is hopeless. Early intervention provides more options.
What FDMS Can’t Do
Be realistic about FDMS limitations:
It can’t force creditors to agree to anything.
It can’t give you money to pay debts.
It can’t fix underlying farm economic problems.
It can’t help if you’re not willing to make changes or compromises.
It works best when restructuring is realistic, you’re committed to making it work, and creditors see reason to cooperate.
The Emotional Side
Facing debt problems and potential loss of your farm is incredibly stressful. The emotional burden affects your health, family, and decision-making.
FDMS provides structure and professional help, taking some weight off your shoulders. The administrator handles communication with creditors and helps you see options you might have missed.
Knowing you’re not alone and that help exists can provide emotional relief even before any debt is resolved.
Getting Help Beyond FDMS
FDMS addresses the financial restructuring side, but you might need other help:
Farm management consultants can help improve operations and profitability.
Mental health support helps deal with the stress and emotional toll.
Legal advice helps you understand your rights and obligations.
Accounting help ensures accurate financial information and tax compliance.
FDMS administrators can connect you with resources and professionals who can help with these aspects.
At Creek Road Financial Inc., we understand that farmers sometimes face debt difficulties due to factors beyond their control. Poor weather, commodity price drops, and unexpected expenses happen.
If you’re emerging from FDMS mediation with a restructuring plan, we might be able to help with refinancing to consolidate debt under more favorable terms.
We also work with farmers who successfully navigated FDMS and are now in stronger financial positions looking to expand or invest.
Contact Creek Road Financial Inc. to discuss your farm financing needs. Whether you’re working through debt problems or ready to move forward after resolving them, we’re here to help.