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What Happens to My Stock If a Company Files Bankruptcy? April 5, 2016

Dothan, Houston
What Happens to My Stock If a Company Files Bankruptcy?, Dothan, Alabama

If you have stock in a company that files for bankruptcy, you may be wondering whether you will get your investment back. This is a critical time, so it helps to reach out to a lawyer for legal advice. You can contact The Gil Law Firm in Dothan, Alabama, for any questions you have about bankruptcy laws in the state and to determine whether you need legal representation. 

Here’s a quick look at what happens when a company goes bankrupt:

Payments After Declaration Of Bankruptcy

Even though you are a stockholder in the company, you are not entitled to receive any payments from the company when the company files for bankruptcy protection. When a company declares bankruptcy, they are responsible for paying payroll taxes and then paying off creditors; stockholders are paid next. This means that if there are no funds left after the company has paid its payroll taxes and taken care of creditors, common stockholders will not get any return on their investment. As a stockholder, this is the risk you take when you buy stock in a company, because there is always a chance that the business will fail.

Effects Of Company Restructuring After Bankruptcy


Some companies file Chapter 11 instead of Chapter 7 bankruptcy, so they have some room to restructure their company while staying in business. This means stockholders may still be able to recover their investment, but only if share prices increase at some point. If a company is able to restructure successfully through business growth or better management, share prices can go up—providing an opportunity for stockholders to sell at a higher price.

If you have any questions about corporate or personal bankruptcy, get in touch with the experienced attorneys at The Gil Law Firm. Call them at (334) 673-0100 or visit their website for more information about their attorneys in Dothan.

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