What Happens to my Stock if a Company goes Bankrupt?

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What Happens to my Stock if a Company goes Bankrupt?

I own XXXXXX stock in XXXXXX Inc. (symbol: XXXX). What happens to my stock if the company goes bankrupt?

This is a question that sometimes comes up, especially after a bankruptcy filing has been announced. For your situation, here’s what you need to know to protect yourself.

Chapter 7 Bankruptcy – What happens to stock when a company files chapter 7?

If XXXXXXX Inc. enters Chapter 7 bankruptcy proceedings, which are often called “straight” bankruptcy, then the shares of common stock would be worthless. If you’re holding shares through a broker-dealer account, the value of that stock will go to zero.

What happens next depends upon your tax situation. If you owned the stock in a taxable account, then you will be able to declare a tax loss. You will need to know several things in order to save taxes on your bankrupt equity:

  • Price you paid for the shares
  • Date of purchase

You can find this information from your broker dealer. Or, if you are working with an advisor at A&I Financial Services, we can provide this information to you.

If you own the company stock in a retirement account, like your 401k or an IRA, then you do not get to declare a tax loss.

Chapter 11 Bankruptcy – What happens to stock when a company files chapter 11?

If XXXXXXX Inc. files for Chapter 11 bankruptcy, often called a “reorganization,” then the company asks the courts to allow it to continue as a going concern. While it continues to operate under Chapter 11 protection, the stock would continue to trade under its ticker symbol with that final letter of “Q” added at the end.

For example, if you bought shares of XXXX before the bankruptcy filing and own them now in your brokerage account, they will be listed on your statement with their usual Q-ticker designation. However, no new shares will be issued during this Chapter 11 proceeding. You’ll also probably hold these “unwanted” shares as a creditor of XXXXXX Inc.

If the company’s plan is confirmed, those shares may recover their value as old shares are canceled and new ones are issued with no final letter at all: just XXXX on your statement. Importantly, your financial advisor will likely recommend against purchasing any more of these shares. The risks of low-priced stock can be substantial.

Remember, it can take years for a Chapter 11 proceeding to be completed. This means that if you’re holding stock in an insolvent company, be sure to monitor it closely for long-term changes in its financial condition and legal status. If you notice problems or major developments, such as moves by other creditors or lawsuits against the debtor, talk to your financial advisor about your options. A financial advisor will usually let you know if there’s anything unusual going on with any of your securities holdings so you can keep up with the latest developments.

With the lesser equity protection that comes with holding stock in a company undergoing Chapter 11, you’ll want to be especially vigilant and potentially take action to protect your investment.

For more information on how bankruptcy might affect your stocks and bonds, see “Bankruptcy Basics: A Guide for Bond and Stock Holders” [ FINRA ].

It is also advisable to read about our Single Stock Diversification service to mitigate risk of losses from holding majority investments in one company.


In bankruptcy proceedings, stockholders are considered “unsecured creditors.” This means that they are not assigned any priority or special claim on the company’s assets. The only exceptions to this rule are preferred stock that has been issued with voting rights, some special types of debt securities, and some companies operating in Chapter 11 bankruptcy proceedings.