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If you invest in stock that loses its value completely, it is possible to claim this loss as a tax deduction, but you must do so at the correct time and only after making sure that the stock has actually lost all technical value. For example, if the company has declared Chapter 7 bankrtupcy, been liquidated and gone out of existence altogether, it will be considered worthless stock.
→ Read MoreFederal rules regulate the order in which creditors receive payment when a company is liquidated through a business bankruptcy. That order is generally based on who assumed the most risk when issuing money to the company. It’s important to note these are general guidelines established by Sec. 507 of the Bankruptcy Code, which includes various exceptions. For example, secured creditors may actually get bumped down in priority if they fail to file their proof of claim.
→ Read MoreWhen a business goes bankrupt, there will be winners and losers amongst its creditors and stockholders. Those who hold debt, like bondholders, will stop receiving interest and principal payments while the company goes through bankruptcy.
→ Read MoreFind the right lawyer for your legal issue.
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