Bankruptcy for a Public Company

{
  "id": "MLC-T-FIN-000040",
  "term": "Bankruptcy for a Public Company",
  "field": "Finance and investing",
  "definition": "A company may decide to declare bankruptcy when it suffers from crippling debt. Federal bankruptcy laws govern how the assets and business of a company will be used to clear its debts.\n\nThere are two types of bankruptcy available to companies (Chapter 7 and Chapter 11), but regardless of the type of bankruptcy a company files under, any common stock in a bankrupt company is likely to be worthless. That is because the common stock (that is, “equity”) is the last in line to receive what’s available to be distributed in a bankruptcy proceeding.\n\nCreditors, including bondholders, suppliers and employees, all come before holders of the company’s common stock. And, even if a company successfully reorganizes, its plan of reorganization often cancels the existing shares of common stock.",
  "references": [
    "SEC Investor.gov Glossary"
  ],
  "url": "https://mlchart.com/terminology/finance/bankruptcy-for-a-public-company/"
}