| The stock market... oh the stock market! Investing in | | | | For the most part bondholders will be paid off first, |
| the stock market is never easy, let's face it it can be | | | | followed by creditors of the company including banks |
| one of the hardest things in the world. And it can get | | | | and suppliers and things of that nature. If all those |
| much more complicated when a company that you | | | | people get paid off and there's still money left over, it |
| have invested in suddenly declares that it's having | | | | can go to the shareholders... but don't hold your breath |
| financial troubles that may lead it down the path to | | | | as I've never heard of any company who went |
| bankruptcy. | | | | through Chapter 13 bankruptcy that actually had |
| As somebody who's invested in a company that is | | | | money left over afterwords to pay back shareholders. |
| contemplating bankruptcy, you may be confused as to | | | | Usually there's not enough money to pay back even |
| what your options are. There is much to consider and | | | | the bondholders. |
| several actions that you can take and I'm going to talk | | | | Chapter 11, on the other hand means that the company |
| about them in this article today. | | | | is going to be re-organized through bankruptcy court |
| First things first, let's talk about the different forms of | | | | under any number of different fashions and will most |
| bankruptcy. For the most part the company will either | | | | likely continue on as a public entity in some form or |
| declare chapter 7 or Chapter 13 (which are basically | | | | another. |
| the same thing), or they will declare Chapter 11 | | | | In Chapter 11 bankruptcy, it is possible for shareholders |
| bankruptcy depending on a number of scenarios and | | | | to hold out through bankruptcy. After the company has |
| of course on their current cash position and future | | | | been reorganized through the bankruptcy court then it |
| financial viability. | | | | may be possible for them to get their act back |
| So what's the difference between Chapter 11 and | | | | together and continue on as a viable company that |
| Chapter 13 bankruptcy? | | | | makes money. If it does so, you can expect its share |
| Chapter 13 bankruptcy (and from here on out I'm just | | | | price to slowly increase in the future. But the thing |
| going to refer to Chapter 13 and Chapter 7 as the | | | | about all that is it may take 3 to 5 years or longer for |
| same thing) means that a company is going to be | | | | this to happen... if it happens at all. |
| liquidated, all of their assets are going to be sold, and | | | | Without a doubt Chapter 11 bankruptcy is better from |
| the company will no longer operate as a viable public | | | | the point of view of the shareholders. If you believe a |
| entity in any form. We're talking oblivion here, complete | | | | company you have invested in will go down the |
| and utter destruction. | | | | Chapter 11 bankruptcy path it may be possible to you |
| The purpose of Chapter 13 is to sell everything in a | | | | to hold onto your shares and eventually make some |
| company that can be sold and then to take that | | | | money again. |
| money and pay back creditors as much is possible. | | | | This involves many risks and a lot of time and you just |
| Unfortunately for you, shareholders are not considered | | | | may not want to mess with it. In which case your best |
| creditors and are way down the food chain in the | | | | bet is to simply sell the shares and cut your losses. |
| pecking order of who gets paid back. | | | | |