Free «Hostess Brands Inc. Debt Financing and Bankruptcy Case» Essay Sample

The United Nations Bankruptcy Code contains six chapters each relating to different situations of bankruptcy and are found in Title 11 of the United States Code.

Chapter 7 deals with the liquidation of a company or a person’s assets in order to settle their debts. It is the considered the simplest form of provisions under the Bankruptcy code. Usually the federal court appoints a trustee who oversees the liquidation of the debtor’s assets. Liquidation follows a detailed audit of the debtor and its creditor’s accounts. The trustee can be allocated to the debtor through the state court with the permission of the federal court (Balleisen, 2001).

Chapter 9 deals with bankruptcy that faces municipalities.

Chapter 11, which Hostess Brands’ bankruptcy case was filed under mainly deals with corporate bankruptcy- the company is allowed to reorganize itself such that it is able to settle its debts and restore itself back to business. The federal government just like in chapter 7 cases assigns a trustee. Unlike in chapter 7, the trustee is not responsible for the liquidation of the company solely but also its reorganization. A detailed audit is performed where the checks and balances are assessed. The company is then subject to a host of conditions –including the inability to function fully as an independent company- until all its debts have been settled.



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Chapter 12 on its part deals with fishermen and family farmers. The Hostess Brands Inc. case could not fall under this chapter.

Chapter 13 tackles cases of individuals facing bankruptcy and agrees on a plan to facilitate the settlement of debts. It is also known as the Wage Earner Bankruptcy.

Chapter 15 is the one that deals with international cases. Under it, stipulations have been laid down as to how to deal with foreign debtors in order that their debts are cleared (Balleisen, 2001 & DePamphilis, 2009).

A Suitable Chapter to File for a Bankrupt Company

Given the above named conditions that the various chapters of the bankruptcy code provide for, it would be wise to recommend chapter 11 for the company that is facing bankruptcy. The advantages that the chapter confers over others can be seen in the implications towards the continuity of the company. These include the following;

The company having provided adequate services as well as products to its clients owes the same clients the products. People often for loyalties to a given product. Therefore, it would be demeaning for the company to terminate the provision of its services.

The choice of chapter 11 does not underestimate the importance of operating debt free and being able to respect the promises it has made to the customers and creditors. The choice instead is objective on the fact that running a business has its own challenges. At times, the challenges can be overwhelming and, the company does not reach the position it had initially aspired to achieve. It is by being given a second chance to reevaluate its strategies and its weaknesses that the company can rebuild to what it had originally intended. The intention of the law makers who established chapter 11 was just in every sense.

The provision of the other chapters on the other hand provides a choice to the company. However, some of the chapters like chapter 9, 13, 12 and 15 do not apply to the above case and are therefore not considered.


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