Debra Booher &Associates Co., Lpa Click here to get your free Legal evaluation
Call Us Today Toll Free

What happens to stock after Chapter 7 bankruptcy?

If you were running a public company in Ohio, you would probably be a major stockholder. A bankruptcy you used to get relief from organizational debt would typically take one of two courses: restructuring or liquidation. The second type, liquidation, is covered under Chapter 7 of the bankruptcy code. 

You may not have to think too much about securities if you are considering declaring debt restructuring or forgiveness for your business. After all, the vast majority of US businesses are small and privately held. However, this discussion could be useful to you if you were considering turning to the public for a new source of capital. As you will see, the privileges of stock ownership often come with a certain amount of risk.

Furthermore, there are many ways you might want to liquidate before you tried a debt relief solution that is as formal as bankruptcy. Opening a line of credit to ease cash flow issues, selling non-essential assets and restructuring are all potential debt management strategies. That said, the process is a good way to move on from an unsuccessful high-risk venture or to reorganize and focus on primary practices.

As explained by the SEC, bond investors and creditors typically have priority over stockholders during Chapter 7 liquidation. You could consider this risk as a balance to the higher returns that stockholders stand to earn should your company earn higher-than-average profits.

One thing to note is that personal and business bankruptcy are significantly different. Also, for companies with a discreet tax identification number, individual credit of the stockholders should not typically be adversely affected by Chapters 7 or 11. However, each case is different, so please do not view this as legal advice. It is simply an informative article.

No Comments

Leave a comment
Comment Information
Email Us For A Response

How Can We Help?

Bold labels are required.

Contact Information

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.


Privacy Policy

Cuyahoga Falls Office
1350 Portage Trail
Cuyahoga Falls, OH 44223

Cuyahoga Falls Law Office Map

Beachwood Office
3401 Enterprise Pkwy.
Suite 340
Beachwood, Ohio 44122

Map & Directions

Independence Office
4700 Rockside Rd
Suite 415
Independence, Ohio 44131

Map & Directions

Westlake Office
1991 Crocker Rd
Suite 600
Westlake, Ohio 44145

Map & Directions

Canton Office
4450 Belden Village Street NW
Suite 204
Canton, Ohio 44718

Map & Directions

Ravenna Office
2633 St. Rt. 59
(Orchard Plaza)
1st floor
Ravenna, Ohio 44266

Map & Directions