Corporations can file for bankruptcy, just like individuals. Corporate bankruptcy is the legal declaration that you cannot pay your debts.
However, the problem arises when the corporation is a large public company that has given out thousands of shares of stock to different stockholders. If you are one of these stockholders, you may be wondering how this company’s bankruptcy will affect you.
Don’t worry—when you are a stockholder, although you own a tiny piece of the company, you personally are not financially responsible for the company declaring bankruptcy. You may lose a lot of money because the value of the stock might drop to zero, but creditors won’t be banging you’re your door asking for millions, that’s for sure!
However, as a stockholder, you are responsible to continue to understand how the company is operating throughout corporate bankruptcy. You do have a small say and how it operates.
Companies can choose to file either chapter 11 or chapter 7 bankruptcy. Most choose to file chapter 11. This means that, although the company cannot currently pay off its debts, it is hoping that with some help and with reorganization the company can be profitable again.
The company’s stock can continue to trade while this is occurring. Sometimes a trustee and creditors will handle the reorganization, and sometime the new owners will handle it. It depends on the specific situation.
In this case, when the reorganization plan is complete, you as a stockholder will get a vote. You should read everything sent carefully, and if you agree vote in favor. If you do not agree, vote against. Your voice does make a difference, because if enough people vote against, the company cannot carry through with the plan.
However, in some cases, this is not how companies choose to proceed. If the company is deeply in debt and does not see any chance for coming back from this debt, even after a reorganization, the company will declare a chapter 7 corporate bankruptcy and liquidate.
When a company liquidates, the trustee sells all of the assets to pay off creditors. For, secured debts are repaid, and then unsecured debts are repaid. If there’s any money left, it is split amount he stockholders, but this is usually not the case.
The bottom line is that bankruptcy is bad for everyone. It is important to follow the things happening in your company so that you are aware of things like this that could be on the horizon. The stock market is a gamble, and sometimes it does not pay off.
Bankruptcy and Taxes
When it comes to bankruptcy and taxes, there can be several serious things that you are going to want to think about. If you are going to file for bankruptcy, you are going to want to make sure that you are doing everything you can to save yourself as much trouble, money, and time as you can.
You should know that any income tax debts might be eligible for being taken care of under Chapter 7 or chapter 13. If you are willing to file for bankruptcy, this is one of five ways that you can get out of tax debt. However, you should remember that in order to get your taxes discharged by filing for bankruptcy, you are going to have to meet certain requirements, so you should make sure you meet them before you file for bankruptcy to get out of tax debt.
If you file for Chapter 7, you are going to be able to get fully discharged of the debts that are allowable. With Chapter 13, there will be a payment plan that is required so that you can pay back some of your debts, and the rest will be discharged. Remember that not all of the tax debt that you might have is going to be discharged if you file for bankruptcy. You have to meet five criteria in order to get your taxes taken care of.
These five criteria that you need to meet in order to get your tax debt discharged when you file for bankruptcy are all important. The first is that the date that the tax return was due was at least three years ago. The second is that the tax return had been filed at least two years ago.
The third is that the tax assessment is at least 240 days old. The fourth is that the tax return cannot have been fraudulent. And the fifth is that you are not guild of tax evasion. If you can meet all of these criteria, you are going to be able to most likely get your tax debt discharged when you file for bankruptcy.
Remember that filing for bankruptcy carries its own consequences, especially on your credit. You should not file for bankruptcy just to be able to get out of paying your tax debt, because it is going to do much more harm than good in the long run when it comes to the damage done to your credit. Only file if you have no other option and if you’ve been told that it is your best chance of beginning to rebuild your life.
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