Filing bankruptcy is rarely an abrupt reality when a bankruptcy is filed. It is important to look at your declining finances as a cause which could lead to filing bankruptcy. Do not put your head in the sand. You need to evaluate your declining finances and the cause of the possible filing of bankruptcy. Take action for a fresh start to move forward. https://njbankruptcylawfirms.com/anyone-can-face-bankruptcy/
This is true for both individuals and companies as well. Usually, finances continue to decline before substantial steps are taken to avoid filing Chapter 7 Bankruptcy. A Chapter 11 or Chapter 13 bankruptcy may be a better option so you do not lose assets.
Let’s look at Hostess and their financial decline which lead to bankruptcy.
The first signs of financial troubles were brewing. Hostess, then called Interstate Bakeries, filed for Chapter 11 bankruptcy the first time. A few factors played into the initial declining finances. One might have been the introduction of new enzymes designed to extend shelf life into many of their products. The new enzymes altered the texture and flavor of the products from their tried-and-true taste. Unpredictable market factors such as low-carbohydrate fad diets and a boost in the popularity of competitors also came into play.
Interstate Bakeries filed bankruptcy. When they emerged, they changed the company to Hostess. Unfortunately, Hostess did not emerge with a fresh start and being debt-free. These debts lay the seeds for the turmoil for Hostess. Rumors circulate that Hostess’ finances are in trouble and could lead to filing bankruptcy.
Nails in the Coffin for Hostess Filing Bankruptcy:
The unions and financial experts bicker over the causes of filing bankruptcy. However, several factors are clear. First, Hostess agreed to a substantial legacy pension to its employees. That pension became unrealistic when facing dwindling sales. Second, immediately before Hostess filed its second bankruptcy claim, it increased the salaries of its top executives. The executive salaries increased up to 80%, despite declining finances and sales. While neither of these factors are enough on their own, they are representations of the cause of filing bankruptcy, the union and mishandling by management.
A little over a third of Hostess’s employees were members of the Bakery, Confectionery, Tobacco Workers and Grain Millers’ International Union. The union had major sway over Hostess’s employment benefit policies. When Hostess was facing serious declines in their finances, they attempted to renegotiate contracts with the unions. While the union relented to cuts in pay and other benefits, they refused to budge on the legacy pensions, a major source of Hostess’s debt.
Corrections Too Late to Avoid Filing Bankruptcy:
Meanwhile, Hostess frantically tried to back pedal from the poor financial decisions that landed them in trouble. The CEO retires, the new CEO dropped the salaries of four key executives as well as himself to $1. The junior executives lost promised raises. Unfortunately, the damage had already been done. Talk of liquidating was circulating.
Twinkies Live on After the Filing of Bankruptcy:
In November 2012, the union went on strike. For Hostess, it was the last straw. Unable to pay their mounting debts and facing an uncooperative union, Hostess shut down their plants and announced their intentions to liquidate the company. All union talks failed. Hostess’s end was imminent. The silver lining it is that Twinkie fans need not despair. https://www.washingtonpost.com/news/wonk/wp/2015/07/07/twinkies-are-not-just-back-from-the-dead-their-baker-may-now-be-worth-billions/ With their popularity and iconic status, the name and recipe for Twinkies will survive to be eaten another day.
As mentioned, bankruptcy is rarely an abrupt realty. It is important that when financial troubles begin to immediately contact me.
I am a Board Certified Bankruptcy Attorney. Come in for a free consultation http://www.njbankruptcylawfirms.com to discuss your financial situation before corrections are too late. I will advise you on whether filing bankruptcy is right for you. If filing bankruptcy is an option, I will advise you whether Chapter 7, 11 or 13 bankruptcy fits with your goals and situation.