Set Your TV on October 28, 2018 For Sunday Morning Weekend Today in Central NY on NBC 3

What You Need to Know When You Own Stock in a Company that Files Bankruptcy.

• Companies can file either Chapter 7 or Chapter 11 bankruptcy. Chapter 7 requires the complete liquidation of the company; under Chapter 11 the company will continue to operate and reorganize. Sears filed Chapter 11.
• Under Chapter 7 the company’s assets are completely liquidated and are used to pay off debt. Generally there are no funds available for shareholders.
• Chapter 11 common stockholders are paid last. Creditors, bond holders, and preferred stockholders are paid first in that order.
• Under Chapter 11 the stock may still trade even if it is delisted. Usually a stock is delisted if it falls under $1 per share.
• A company that files Chapter 11 may ultimately file for Chapter 7.
• If the company emerges from Chapter 11 bankruptcy the existing common stock is cancelled and a new stock is issued.
• Dividend payments are suspended during both Chapter 7 and Chapter 11.
• Investors can deduct worthless stock only in the tax year it becomes completely worthless.
• Most brokerage firms will provide assistance in providing documentation for worthless stock.
• Borders and Blockbuster are previous examples of stocks that became worthless.