During bankruptcy, bondholders will stop receiving interest and principal payments, and stockholders will stop receiving dividends.

When the matter is concluded, if you are a bondholder, you may receive new stock in exchange for your bonds, new bonds, or a combination of stock and bonds. If you are a stockholder, the trustee may ask you to send back your stock in exchange for shares in the reorganized company. The new shares may be fewer in number and be worth less. The reorganization plan will spell out your rights as an investor, and what you can expect to receive, if anything, from the company.

(Reviewed 11.10.08)