Famous Brand Hangs in Balance Due to Business Bankruptcy

Businesses in Sacramento and elsewhere are successful due to many parts working together simultaneously. When the economy is struggling, it is even more essential for a business to have all its pieces working in harmony. But if one part stops working, then the business may choose to file for business bankruptcy.

Hostess Brands Inc. is now facing liquidation following a failed attempt to resolve a dispute with striking works. Hostess’ employees were strike over a recent contract imposed upon them. The company’s board made the decision after determining that the company no longer had the resources to continue to oppose the striking workers.

As the company enters liquidation following a decision last week, almost 18,000 jobs appear to now be gone. This includes over 30 bakeries, more than 550 distribution centers and an additional 570 outlet centers across the country, including California. Despite the impending liquidation, some believe popular brands such as Wonder Bread and Twinkies will receive some interest in a sale of assets.

Even though it may be a difficult decision for a company to make, filing for chapter 11 bankruptcy can be helpful for businesses struggling with financial challenges. A Chapter 11 filing stops all collection action against the company immediately upon filing. This includes mechanics’ liens and repossession actions. In most cases, filing for Chapter 11 will reduce interest payments. It may also reduce or even eliminate penalties and fees associated with creditors. This worked previously for Hostess, which previously entered bankruptcy but emerged in 2009.

Bankruptcy can enable a business struggling with debt or limited financial resources to continue operating. Debt can substantially affect the ability of a business to operate. Debt relief can allow a business to still fill orders and meet payroll while getting out from under the debt.

Source: WPTV.com, “Hostess bankruptcy update: After Monday’s liquidation hearing, nearly 18,500 workers will lose jobs,” Chris Isidore and James O’Toole, Nov. 19, 2012