chapter 11 filing

This reorganizations allows it to try to become profitable again within the framework of the legislation.

In effect, the company’s management continues to run the day-to-day business operations of the business, but the main difference to a normal situation is that all major business decisions have to be approved by a bankruptcy court.

If the company is publicly traded, the securities may continue to trade even after the company has filed for bankruptcy under Chapter 11.

However, in real life, listing standards are very strict and many Chapter 11 companies have hard time to meet those requirements in order to continue to trade on the major stock exchanges, including Nasdaq and the New York Stock Exchange.

Even when a company is delisted from one of the existing major stock exchanges, their shares can an many times do continue to trade on either the OTCBB or the Pink Sheets trading. Investors should approach buying securities in a Chapter 11 bankruptcy company very cautiously indeed.

This is because although the company may emerge from a typical bankruptcy as a viable entity, the creditors and the bondholders typically become the new owners of the shares.

Also, in most instances, the company's plan of reorganization will cancel all the existing equity shares in the company.