Chapter 11 Bankruptcy Information & Stocks

Chapter 11 allows businesses to file for bankruptcy but remain in control of business operations, under the jurisdiction of the court. Stocks in the business may continue to trade while it reorganizes under Chapter 11.

Stock

When a business files for Chapter 11, public stock transfers to the NASDAQ if it had previously been on the American Stock Exchange or the New York Stock Exchange. If a company's debts exceed assets, the shares become worthless.

Reorganization

Often, reorganization plans cancel existing equity shares. Secured and unsecured creditors receive payment from the company's assets before stockholders. If the company does not cancel shares, those shares may become severely diluted in order as part of the reorganization plan.

Recovery

If a business recovers from bankruptcy, it may have two kinds of stock. The first kind of stock remains from the old common stock and the new issued as part of the reorganization. Old stock has a "Q" added to the end of its ticker symbol to indicate its involvement in bankruptcy proceedings.

References

• US Securities and Exchange Commission: Corporate Bankruptcy
• ZeroMillion: Chapter 11 Bankruptcy Law Information