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MA residents may face financial challenges with company's close

Residents of Massachusetts have probably heard from the national media that Hostess, a company which produces snack cakes like Twinkies and Ding Dongs, will likely be shutting down in the wake of a strike that hurt the company's business. Hostess is already in the midst of a Chapter 11 bankruptcy and now claims that the strike will made it impossible for the company to reorganize its business finances and survive.

Hostess has a factory in Massachusetts, and if the company does indeed fold despite recent court intervention, 300 workers in this state stand to lose their jobs. When a household suddenly loses a source of income from employment upon which they relied for financial survival, it may leave the family facing financial challenges and needing debt relief.

A job loss is one of the most common reasons people file for bankruptcy. If a family who has suddenly lost income from a job needs to eliminate debt fast, they ordinarily have two options. A person may file a Chapter 7 bankruptcy, in which the person may have to surrender some of his or her "non-exempt" property to satisfy his or her creditors. The creditors will each take a proportion of the proceeds from that property but will in exchange lose the right to collect their debts from the person who filed.

On the other hand, in a Chapter 13 bankruptcy, a debtor will typically retain all of his or her non-exempt property. However, the debtor will, using defined standards under federal law, propose to pay monthly amounts toward his or her debts for up to five years. These plans typically work best when a debtor has employment and can make the required regular payments. If the debtor makes payments as agreed, then he or she will receive full debt relief on any outstanding accounts.

When a factory like Hostess closes, it can leave many people in serious financial straits. Thankfully, those who may require debt relief as a result of a business' collapse may use bankruptcy to meet their needs.

Source: The Boston Herald, "Hostess shutdown hits Massachusetts workers in stomach," Ira Kantor, Nov. 16, 2012

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