...Financing and Bankruptcy Lynna Revard Trident University Abstract The purpose of this paper is to go into detail and explain the different aspects of debt financing, bankruptcy, and the outcome of Hostess Brand Inc., filing for bankruptcy. It will go into detail of what debt financing is how to avoid different aspects of it. I will also go into detail and explain not only the history of bankruptcy, but also the different chapters of bankruptcy and how each one differs from the other. You will read about things that you might already know and hopefully by the end of this paper I am able to teach some things that you were possibly not aware of. Main Body Hostess Brands Inc. and its beloved bread and snack cake products date back to the late 1800s. Its brands are some of the best known snacks and breads in the United States. They make many of the top-selling snack cakes in convenience stores, including Twinkies®, CupCakes and Fruit Pies. Before becoming Hostess Brand Inc., the company was known by many names. Interstate Bakeries Corporation, Holsum Bakeries, Bakers Inn, Hostess Bakeries, and Hostess just to name a few. Effective November 2, 2009, the company was renamed Hostess Brands, Inc. after the cake division that featured Twinkies and Cupcakes although it continues its bread line including Wonder Bread. It has been a very successfully company since it started its productions however; in 2004 the company had to file for bankruptcy and again...
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...Bankruptcy laws help people who can no longer pay their creditors get a fresh start by liquidating assets to pay their debts or by creating a repayment plan. Bankruptcy laws also protect troubled businesses and provide for orderly distributions to business creditors through reorganization or liquidation. Most cases are filed under the three main chapters of the bankruptcy code. They are Chapter 7, Chapter 11, and Chapter 13. Federal courts have exclusive jurisdiction over bankruptcy cases. This means that a bankruptcy case cannot be filed in a state court. Below is a high-level summary on each bankruptcy code: Chapter 7 – Liquidation under the bankruptcy code: The chapter of the Bankruptcy Code providing for "liquidation," ( i.e., the sale of a debtor's nonexempt property and the distribution of the proceeds to creditors.) Chapter 11 - Reorganization under the bankruptcy code: The chapter of the Bankruptcy Code providing (generally) for reorganization, usually involving a corporation or partnership. (A chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. People in business or individuals can also seek relief in chapter 11.) Chapter 13 – Individual debt adjustment: The chapter of the Bankruptcy Code providing for adjustment of debts of an individual with regular income. (Chapter 13 allows a debtor to keep property and pay debts over time, usually three to five years.) To some extent, Chapters...
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...Chapter 7 Bankruptcy Chapter 7 Bankruptcy is a “liquidation form of bankruptcy under federal law (Twomey & Jennings, 2014, p. 747)”, in which one can convert property into money to pay a debt or to satisfy other financial responsibilities (Twomey & Jennings, 2014, p. 747). Consumers, such as Andy, must exhibit their inability to repay their debt, as well as, satisfy the requirements outlined in a “means test” in accordance with The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCA) (Twomey & Jennings, 2014, pp. 748-749). A Chapter 7 Bankruptcy “means” test is performed by the state in which one is filing for bankruptcy. In shaping his voluntary decision, in which Andy petitions the court and files for a Chapter 7 Bankruptcy on his own accord, Andy’s “means” testing would be determined by the state of Florida’s median family income. If Andy’s disposable income is equal to or less than Florida’s median family income, then Andy could move forward to petition the court for Chapter 7 Bankruptcy. For the purpose of this case study, we will use the median income for Orange Park, Florida and consider Andy’s household to be 1 since it is not known if Andy claims his dependent child on his federal income taxes. The Bankruptcy Means Test Calculator for Orange Park, Florida (Clay County) calculated Andy’s median income at $2222.22 monthly based on his annual salary of $40,000. In Clay County, Florida the median income for one member household is $3445.00...
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...House passed a business sought bankruptcy bill with a 302-126 vote, while the Senate had passed it on March 10th, with a 74-25 vote. Bankruptcy reform was initially introduced in 1998, but had difficulty in getting passed until now. This bill is a huge victory for credit card companies and retailers, but will undoubtedly affect millions of Americans in a negative manner (www.onlin.wsj.com/20050415). The bill is the first major change to the bankruptcy laws in twenty-seven years (www.pbs.org/3.25.05). The bill will make it harder for consumers to eliminate their debt with the use of bankruptcy. There are now new restrictions and a “means-test”, which determine if consumers can have their debts erased by Chapter 7 bankruptcy or Chapter 13 bankruptcy. The bill also makes attorneys liable for any inaccuracies in their clients’ bankruptcy filings. This bill has several controversial issues associated with it and will be explained later, along with the actual provisions of the bill. To understand the controversy, one must first understand what bankruptcy is and the difference between Chapter 7 and Chapter 13 bankruptcy filings. Chapter 7 bankruptcy is a liquidation proceeding in which the debtor turns over all of their non-exempt property to a bankruptcy trustee who converts it to cash to pay off the creditors. Within four months, the debtor is usually relieved of all obligations. In many cases, the debtor has no assets to lose, so Chapter 7 gives the individual a relatively...
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...BANKRUPTCY This article is intended to provide some general bankruptcy information and is certainly not intended to replace the tailored information a debtor will receive from an attorney. Bankruptcy is governed by Federal Law (Title 11 of the US Code separated into individual Chapters, each dealing with a different type of bankruptcy) but the bankruptcy laws of each state also play an important part; consequently, though there are bankruptcy kits, you will probably need a lawyer to successfully file and a lawyer search should focus on a bankruptcy attorney or bankruptcy law firm licensed in the debtor’s state of residence. The attorney licensed in your state can tell you how to file for bankruptcy in a federal court within your state. American bankruptcy is actually a form of relief granted by a court, so it is not so much a matter of a debtor “declaring bankruptcy”; rather, someone files a petition requesting that the court discharge or reduce or restructure debts in bankruptcy. In American bankruptcy, a federal court manages a debtor’s property to protect the debtor from his/her creditors and to benefit the creditors as much as possible under the circumstances. While bankruptcy is designed for long-term relief, one of the most important features of filing for bankruptcy is the “automatic stay.” When a petition is filed for bankruptcy, either by the debtor (“voluntary bankruptcy”) or by one of his/her creditors (“involuntary bankruptcy”), most collection efforts such...
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...Do Bankruptcy Laws unjustly favor Lenders? Intro Bankruptcy is a legally declared inability or impairment of ability of an individual or organizations to pay their creditors. Bankruptcy law provides for the development of a plan that allows a debtor to resolve his debts through the division of his assets among his creditors. Although the goal of the modern bankruptcy is to allow the debtor to have a “fresh start,” and to be granted relief of some liability, there haven’t been any regulators to protect consumers or debtors since the first Bankruptcy Law that the Congress passed in 1797 which lead to imprisonment of thousands of debtors. And it wasn’t till 1841 that the debtor could voluntarily go into bankruptcy and so avail himself of this privilege of discharge. The Federal Bankruptcy Act of 1898 had 3 principal objects in view: 1. To prevent preferences and ensure equality in payment as between the creditors of insolvent debtors; 2. To punish and discourage commercial fraud; and 3. To discharge honest debtors from their debts when overwhelmed by financial misfortune through no fault of their own. The act gave creditors collectively full power over the administration of insolvent estates and placed upon them the responsibility for enforcement of the act. New Legislation The new Legislation enacted by Congress called the Bankruptcy Abuse and Consumer Protection Act was intended to make it more difficult for debtors to file a Chapter 7 Bankruptcy under which most...
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...Chapter 25 Bankruptcy, Reorganization, and Liquidation ANSWERS TO BEGINNING-OF-CHAPTER QUESTIONS 25-1 Bankruptcies occur in firms of all sizes. Small firms, with fewer creditors, are often able to work out informal settlements and thus avoid the time and expense of formal bankruptcy. Ross Corporation, described in Question 3, is probably too large, and it has too many creditors, to work out an informal settlement. If Ross attempted to resolve its problems informally, the attempt would probably fail, and then it would have to resort to the federal bankruptcy court. Note that if there had been fewer creditors, and particularly if most of the debt were owed to a few banks, then the chances of an informal resolution would be better. But with many holders of the publicly traded bonds, 15 banks, and 250 unsecured creditors, there would probably be too many holdouts to reach an informal resolution. 25-2 The judge in a federal bankruptcy proceeding can abrogate all contracts, including labor contracts. If a contract requires payments greater than the company’s cash flows can support, then the judge can order that payments be scaled back to a level the company can afford. Labor contracts were abrogated for a number of firms that were hit with asbestos suits, notably Johns Manville, and currently several airlines are in bankruptcy proceedings under which labor contracts will likely be changed. 25-3 a. As noted above, is probably too large, and it has too many creditors...
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...to declare bankruptcy? Why are these factors important? Chapter 7 and Chapter 13 bankruptcies are full of advantages and disadvantages, but at the same time they are very different. Without knowing these differences a person could lose many things from money to possessions. Chapter 7 bankruptcy can wipe out most of ones debts, but certainly not all of them. Certain kinds of debt are not covered by the terms of Chapter 7. Some examples of debts that must be paid after filing for bankruptcy would include child support, alimony, income taxes and penalties, student loans, and court ordered damages due to unfair and unrighteous acts. Bankruptcy courts handle your financial problems until the case ends. A court assumes control of all ones debts that are owed and all property that is not exempted. A trustee is appointed to be in charge of your debt. The trustee collects property that can be taken and sells it to repay some creditors. That property can be surrendered to the trustee, which can agree to pay the market value or one may choose to trade exempt property with nonexempt property. A small number of people actually lose property when filing bankruptcy. If a person changes their mind about filing for bankruptcy, they may ask the court to dismiss the case. At the end of the process, the court would discharge most of the debts and one is unable to file for another Chapter 7 bankruptcy for at least another six years. On the other hand, Chapter 13 bankruptcy is mostly used...
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...survived bankruptcy? Corporate Financial Management Bus 607 By Marie Dawes Which Companies Have Survived Bankruptcy? According to Gerald S., bankruptcy is a generalized term for a Federal Court procedure that helps consumers and businesses get rid of their debts and repay their creditors (2014). If anyone can prove that they are entitled to it, the bankruptcy court will protect them during the bankruptcy proceeding. In general, bankruptcies can be categorized into two types: liquidation and reorganization. The U.S. Court of Bankruptcy (2015), states that among the popular proceedings are chapters 7, 11, 12, and 13, which individuals and businesses use to file. Chapter 7 bankruptcies normally fall into the liquidation category. This means that an individual’s own property can be taken away and sold in the process of liquidation in order to pay back the debts. Conversely, chapter 13 bankruptcies fall under the reorganization category, meaning that the individuals will probably be able to keep their property, but they must submit and stick to a plan that will allow the person to repay some or all of their debts within 3 to 5 years. A case filed under chapter 11 of the United States bankruptcy code is frequently referred to as a reorganization bankruptcy. Its bankruptcy proceedings are usually employed by struggling businesses as a way to get their affairs in order and pay off their debts. In addition, some individuals also file for chapter 11 bankruptcy when they...
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...about disclosing bankruptcy to the public are unclear, and so companies are able to make their own decisions about when to disclose the fact that they are filing for bankruptcy protection. The Wall Street Journal analyzed the bankruptcy filings of 90 large public companies and found that 29 did not disclose their bankruptcy preparations in any way. A few collapsed too quickly to report, but most made the decision not to let the public know. Is that a bad thing? On one hand, a free market relies on transparency and honesty. Bankruptcy filings are material information and, as such, investors have a right to know that a company is in distress. On the other hand, filing for bankruptcy protection is intended to help the company get out from under debt and keep operating. Disclosure can work against that process. With the introduction of innovations such as credit default swaps, creditors are less likely to be motivated to work with the company. Furthermore, employees with mobility are likely to begin departing once they know the company’s future is in doubt. Investors have a right to know, while stakeholders have a right to their livelihood. Where do we draw the line (9)?” Corporate Bankruptcy Explained Bankruptcy is a judicial process to provide an individual or a business that no longer can pay its debts with relief from financial obligations. It distributes a debtor’s property equitably among creditors and enables the debtor to start afresh. Federal bankruptcy laws govern how...
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...College 1. When reviewing the American Bankruptcy Institutes website I was researching the total number of bankruptcies in 2012, the total number of non-bankruptcies in 2012, and the total number of business bankruptcies in 2012. My findings concluded that the total number of bankruptcies in 2012 which consists of business and non-business fillings which includes the states and D.C. was 1,232,294 (ABI, 2013). The total number of non-business filings in the states and D.C. in 2012 was 1,232,294. The report shows that there were 811,789 non-business Chapter 7 filings and 352,553 non business Chapter 13 filings in 2012 (ABI, 2013). My reports also show that amongst the 57,527 business filings in 2012 that 7,760 filed for Chapter 11, 97,167 filed for chapter 7, 12,485 filed for Chapter 13, and 115 businesses filed for Chapter 15 (ABI, 2013). With the information provided we can conclude that more companies file for Chapter 7. Filing for Chapter 7 means that a business simply does not have the income to repay any portion of their debts. In this case many of the assets will have to be turned over, and this can make it hard for the business to continue to operate, and it may involve the liquidation of the business (All Law, 2013). Now chapter 13 came in second place with 12,485 filings, and with Chapter 13 this is usually the best option for businesses. There is no asset-sale in a Chapter 13, but businesses do need to demonstrate that you have a sufficient...
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...Bankruptcy Assignment Warren and Westbrook, The Law of Debtors and Creditors Sara Israelyan Spring Semester 2011 University of Minnesota Law School March, 2011 Warren and Westbrook, The Law of Debtors and Creditors Problems 8.1 Absent bankruptcy, what can Harv and Lois protect as the creditors begin to move in? What if they filed a Chapter 7? What could they protect if they lived in Cheyenne, Wyoming? When considering bankruptcy, pre-bankruptcy planning is one of the most important steps for Harv and Lois. In a Chapter 7 bankruptcy, the TIB will take all non-exempt valuable property that he can sell to distribute the money to the creditors. The main idea behind the Chapter 7 bankruptcy is ‘liquidation’. However, Harv and Lois can arrange their property and debt before filing for Chapter 7 bankruptcy, in order to maximize their exemptions. Generally, during a pre-bankruptcy planning, the debtor converts some of its non-exempt assets to exempts ones to save the property for creditors. In this case, usually the debtor sells or borrows against non-exempt property in order to buy exempt property. This right to maximize the exemptions however is not unlimited. After filing bankruptcy, all of Harv’s and Lois’s property, both real and personal, becomes a part of the bankruptcy estate. However, under the Bankruptcy Code, they are allowed to exclude certain property deemed necessary for everyday life and sustain a reasonable fresh start after discharge. Harv and Lois...
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...Becker CPA Review, PassMaster Questions Lecture: Regulation 7 CPA PassMaster Questions–Regulation 7 Export Date: 10/30/08 1 © 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Regulation 7 Agency CPA-01299 Type1 M/C A-D Corr Ans: C PM#1 R 7-01 1. CPA-01299 Lw R02 #5 Page 12 Lee repairs high-speed looms for Sew Corp., a clothing manufacturer. Which of the following circumstances best indicates that Lee is an employee of Sew and not an independent contractor? a. b. c. d. Lee's work is not supervised by Sew personnel. Lee's tools are owned by Lee. Lee is paid weekly by Sew. Lee's work requires a high degree of technical skill. CPA-01299 Explanation Choice "c" is correct. A clear example of an employee is one who works full time for the employer, uses the employer's tools, is compensated on a time basis, and is subject to supervision of the employer in the details of the work. A clear example of an independent contractor is one who has a calling of his own, who uses his own tools, is hired for a particular job, is paid a given amount for the job, and follows his own discretion. Thus, payment on a weekly basis is an indication that a person is an employee rather than an independent contractor. Choice "a" is incorrect. If Lee's work is not supervised by Sew's personnel, per the above, that would be an indication of independent contractor status. Choice "b" is incorrect. Per the above, Lee's...
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...Case I Walnut Street Four The petition for involuntary bankruptcy for the form Walnut Street Four should be granted. The partnership is being forced in an involuntary bankruptcy by its creditor which in this case the partner Bernan is filing bankruptcy. The partner Bernan, as a good chance of the case being file because the general partnership owes their business more than $10,775. The Walnut Street Four fits into the group that can file bankruptcy since it’s either a farmer, nonprofits, banks, insurance companies, credit union or saving and loan institutions. The group as missed many payments at a large amount. In order for most case to process a debtor has two have twelve or more creditor and three of them has to sign the petition for bankruptcy. In this case the creditor is filing because the partnership stop making payments and now is in debt over $380,000. Since the other two partnership choose to not make payments it makes sense for Bernen to file Chapter 7 to completely dissolve the business. When filing a Chapter 7 in bankruptcy this involves closing shop and liquidating a debtor assets. ** Case 11 Richard P. Friese Chapter 11 is a way for a person to reorganize their personal finances under to the watch of the courts. In most cases the debtor can operate business while going through the bankruptcy procedures; this called debtor-in-possession. In this case the court cannot confirm Mr.Friese plan of reorganization. Since none of the creditor has agreed...
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...Becker CPA Review, PassMaster Questions Lecture: Regulation 7 CPA PassMaster Questions–Regulation 7 Export Date: 10/30/08 1 © 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Regulation 7 Agency CPA-01299 Type1 M/C A-D Corr Ans: C PM#1 R 7-01 1. CPA-01299 Lw R02 #5 Page 12 Lee repairs high-speed looms for Sew Corp., a clothing manufacturer. Which of the following circumstances best indicates that Lee is an employee of Sew and not an independent contractor? a. b. c. d. Lee's work is not supervised by Sew personnel. Lee's tools are owned by Lee. Lee is paid weekly by Sew. Lee's work requires a high degree of technical skill. CPA-01299 Explanation Choice "c" is correct. A clear example of an employee is one who works full time for the employer, uses the employer's tools, is compensated on a time basis, and is subject to supervision of the employer in the details of the work. A clear example of an independent contractor is one who has a calling of his own, who uses his own tools, is hired for a particular job, is paid a given amount for the job, and follows his own discretion. Thus, payment on a weekly basis is an indication that a person is an employee rather than an independent contractor. Choice "a" is incorrect. If Lee's work is not supervised by Sew's personnel, per the above, that would be an indication of independent contractor status. Choice "b" is incorrect. Per the above, Lee's...
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