Twinkies & You

November 29, 2012

Hostess Brands Inc., the maker of Twinkies, Wonder Bread, Ding Dongs, and a host of other breads and treats, filed for bankruptcy recently. As the case continues, new revelations suggest that the story of the Irving, Texas baker is instructive not just for corporate debtors, but for consumer debtors, too.

 

In 2011, Hostess Brand Inc. was worth $450 million, according to debtor testimony in bankruptcy court. Today, however, the company is worth roughly $225 million. What happened in the intervening year? How could the company’s book value fall by 50 percent in just twelve months?

 

Testimony and court documents may ultimately answer this question. Initial reports suggest that legacy costs, the price of labor and ingredients, and inefficient management may have played an important role. Whatever the reason, Hostess’s experience illustrates a fundamental reality: debtors heading toward insolvency tend to experience rapid declines in value in the period preceding a bankruptcy filing.

 

What does this mean for individual debtors? If you’re facing an out-of-control debt spiral, acting sooner may be considerably more valuable to you than acting later. Just imagine how much Hostess shareholders could have saved if managers had made a more prompt bankruptcy filing. If you’re funding your day-to-day lifestyle with high interest debt, such as credit cards, payday lenders, and home equity loans, you may be extending your current financial life at horrendous future cost to your estate.

 

Ready to talk to the bankruptcy professionals at Fears Nachawati? With years of experience and dedicated expertise, our Dallas-based attorneys know how to fight for your rights, advise you of your interests, and help you navigate the difficult waters of personal bankruptcy. Contact us today for your free consultation.

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