Corporate Bankruptcy and Your Stocks

In the American economic system, many corporations are public, which means that any citizen with enough money can own stock in that corporation. Many individuals invest large sums of their money into these corporations. But what happens when that corporation files bankruptcy?

When a corporation in which you own stock declares bankruptcy, your money may not be lost. If you have questions about corporate or personal bankruptcy, the Boca Raton bankruptcy lawyers of Eric N. Klein & Associates may be able to help. Call our offices at 561-353-2800 for more information.

The Effects of Corporate Bankruptcy

Like individuals, corporations usually have two basic options when declaring bankruptcy. A corporation in a poor financial state with no prospects of recovery may file Chapter 7 bankruptcy, under which the corporation liquidates its assets and ceases operations.

When this happens, an individual that own stock in the company may lose all of the money he or she invested. If the corporation has money left over after paying its creditors, the investors may receive dividends, but the sum will most likely be a fraction of the initial investment.

Other corporations may file Chapter 11, which allows them to restructure and continue operations. This chapter is much like Chapter 13 for individuals.

When a corporation declares Chapter 11 bankruptcy, the stockholders retain their stocks, though they are often worth much less than they were when initially purchased. Fortunately, the stock price may eventually rise again.

Contact Us

Losing money in the stock market may have devastating effects on an individual’s finances. If you owned stock in a corporation that went bankrupt, you may want to discuss your financial situation with the experienced Boca Raton bankruptcy attorneys of Eric N. Klein & Associates. Contact us today at 561-353-2800.