What happens to common stock in bankruptcy?
When a company seeks protection under Chapter 11, does all the common stock become null and void? Or does the common stock just remain inacative and not traded?
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Answer by zeuz
chapter 11 is a reorganization. The value of the stock is a function of the net worth of the company. It can be traded.
If the company goes into chapter 7, then all of the company's assets are liquidated to pay all creditors. If there is any money left over, it is returned to the existing stockholders in proportion to the number of shares of stock.
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