Ganje Law Office

Archive for June, 2009

From Lawyers.com

Q: What is “bankruptcy” and how does it affect business?

A: While technical definitions of bankruptcy can vary, the term refers to a situation where an individual or a business has liabilities that exceed assets, or where the person or business is insolvent by reason of not being able to meet financial obligations as they become due.

Virtually anyone or any type of business entity can start a bankruptcy proceeding by filing a petition in federal bankruptcy court. The bankrupt person who files a petition is called the bankruptcy debtor.

The filing of a bankruptcy petition affects all creditors of the debtor. There are many different categories of creditors, including:

• Secured creditors (usually those with a lien on a debtor’s property)
• Unsecured creditors (usually vendors, credit card companies and anyone else who doesn’t have a security interest in any of the debtor’s property
• Judgment creditors (usually those creditors who have sued and obtained a judgment against the debtor prior to the bankruptcy being filed)
• Creditors with super priority claims (who have higher priority over other creditors because of special rules or proceedings within the bankruptcy)
• Creditors with administrative claims (usually creditors such as accountants or lawyers with claims that are given priority because of their having assisted in the bankruptcy in some manner)
• Post-petition creditors (who have extended credit to the debtor after the bankruptcy has been filed. Bankruptcy generally covers only pre-petition debts, i.e. those that were outstanding at the time the petition was filed).

Inevitably, every business is going to run into situations where customers file bankruptcy. Businesses will end up filing bankruptcy, as well.
Q: What is the effect of filing a bankruptcy petition?

A: The filing of a bankruptcy petition is a lot like filing a lawsuit in the sense that the act of filing simply starts a legal proceeding without any guarantees of the outcome. The debtor will make allegations, but there is no guarantee that the court will declare the debtor bankrupt or grant any other requests. The debtor must go through a statutory process, with creditors and other third parties given the opportunity to challenge and object to the relief being sought by the debtor.

Unlike any other type of legal proceeding, though, the filing of a bankruptcy petition immediately gives rise to an “automatic stay” that stops creditors from taking any further action to try to collect their debts unless or until the bankruptcy court decides to the contrary. The automatic stay is an injunction that is issued against all creditors immediately upon filing a bankruptcy petition. The intent behind the automatic stay is to give debtors temporary relief from their financial problems, giving them the opportunity to figure out how to deal with them.

The automatic stay is only temporary, and there are any number of ways that a creditor can get relief from the bankruptcy court to proceed with trying to collect its debt. One common way is to file a petition or motion with the court, asking for relief from the automatic stay. In the case of a secured creditor, a court will look to see if the creditor is adequately protected. For example, a creditor with a lien on real property may still be adequately protected if there is enough equity and/or the debtor starts making “post-petition” payments again after the filing of the bankruptcy. If there isn’t adequate protection, a creditor may be given permission to proceed with foreclosure or other remedies.
Q: What kinds of bankruptcies are there?

A: There are four kinds of bankruptcy proceedings that are commonly referenced by the different chapters of the federal bankruptcy code that covers them:

• Chapter 7 is the most common type of bankruptcy proceeding. Chapter 7 is available to individuals, married couples, corporations and partnerships. In this proceeding, individual debtors may seek a discharge of their unsecured debts, meaning that they are extinguished by order of the bankruptcy court at the end of the proceeding. Unless there are problems in the case, individual debtors are usually able to get a discharge within four to six months of filing the case.

As in all bankruptcy filings, the filing of a Chapter 7 proceeding imposes an automatic stay on all creditors, which prevents them from trying to collect their debts without first getting approval of the bankruptcy court. A bankruptcy trustee is appointed to the debtor’s case, who controls all of the debtor’s assets. All creditors must be given notice of the proceeding. The trustee then identifies which assets of the debtor are exempt from the bankruptcy proceeding (such as personal effects, household goods, qualified retirement funds), and those that will be sold to pay off creditor claims.

A Chapter 7 is a liquidation proceeding, which means that the debtor’s non-exempt assets, if any, are sold or otherwise liquidated by the trustee. The proceeds are distributed to creditors according to the priorities rules established by the federal bankruptcy code. Any wages the debtor earns after the case is begun are the debtor’s, beyond the reach of creditors who had claims on the date of filing.

• Chapter 11 is a reorganization proceeding, typically for corporations or partnerships. A business in financial trouble may elect to file a Chapter 11 petition to try to reorganize outstanding debts and continue to operate the business. There’s an automatic stay, just like any other bankruptcy proceeding. Unlike a Chapter 7 proceeding, though, a business that files a Chapter 11 proceeding will become a debtor-in-possession, and there will initially be no bankruptcy trustee appointed. The debtor-in-possession is given an opportunity to prepare a plan of reorganization that must be approved by a majority of the creditors. If a plan is approved by the creditors and is confirmed by the court, it binds both the debtor and the creditors to its terms of repayment. Under the plan, the debtor-in-possession can reduce debts by repaying a portion of its obligations and discharging others. It can also terminate burdensome contracts and leases, recover assets, and rescale operations to get back to profitability. Under this chapter, a business normally goes through a consolidation period and comes away with a reduced debt load and a reorganized business. Plans can call for repayment out of future profits, sales of some or all of the assets, or a merger or recapitalization. Generally, the plan of reorganization must provide for paying creditors at least as much as they would have been entitled to be paid in a Chapter 7 liquidation proceeding.

It isn’t easy to salvage a business in a Chapter 11 proceeding, and many of them end up converting to a Chapter 7.

• Chapter 12 is a simplified reorganization for family farmers, modeled after Chapter 13. The debtor retains his property and pays creditors out of future income.

• Chapter 13 is a repayment plan for individuals only. It protects the debtor from collection action during the case and discharges any unpaid balance of dischargeable debts at the end of the plan. It’s a powerful tool for debtors to regain control of their financial lives and to get a meaningful fresh start. A debtor must have a regular income and less than $922,975 in secured debt (debt involving property that your creditor might take if you don’t make your payments) and $307,675 in unsecured debt. The debtor keeps his property and makes regular payments to the Chapter 13 trustee out of future income, to pay creditors over time (3-5 years). Repayment in Chapter 13 can range from 10% to 100% depending on the debtor’s income and the makeup of the debt. Certain debts that cannot be discharged in Chapter 7 can be discharged in Chapter 13 (which is one incentive for a debtor to choose this type of proceeding over a straight liquidation under Chapter 7). Chapter 13 also provides a mechanism for individuals to prevent foreclosures and repossessions, while catching up on their secured debts.

Q: When should a business file for bankruptcy?

A: This is not an easy decision and a business owner should first exhaust all other options. There are also different types of bankruptcy proceedings, so the decision may not be as simple as you think. It’s a good idea to get financial and legal advice before taking any action.

As a business owner, you may want to file bankruptcy if there’s a black cloud of credit problems hanging over your head that just won’t go away. In these situations, the relief of filing bankruptcy will usually outweigh the inevitable drawbacks from doing so (like loss of the business, hurting credit history, embarrassment).

In a business setting, though, there may not be quite the stigma to filing bankruptcy and it can actually be an effective tool to save a business enterprise. In a Chapter 11 proceeding, for example, you can sometimes restructure or consolidate debts and come out of the bankruptcy with a fresh start. In most instances, creditors would rather that a business not file for bankruptcy since they may then get nothing. But creditors are usually of the mindset that none of them is going to accept a compromise on a debt unless they all do. The threat of filing bankruptcy is sometimes just the leverage a business needs.

A distressed business may actually be able to work with one or more creditors up front to develop a plan of reorganization prior to filing bankruptcy, and then use a bankruptcy filing as a means to put the plan in place. The bankruptcy will allow for an orderly process to be followed with all claims being addressed within the same proceeding within the exclusive jurisdiction of the bankruptcy court. Otherwise, the creditors working with the debtor would have to worry about other creditors trying to exercise their own remedies by filing separate lawsuits or by trying to foreclose on assets that the debtor would need to reorganize.

Most publicly-held companies will file under chapter 11 rather than chapter 7 because they can still run their business and control the bankruptcy process. Chapter 11 is a way to rehabilitate the business. Sometimes the plan returns the business to profitability; other time it ends up liquidating.

Under chapter 11, a company’s stocks and bonds may continue to trade but the company must file SEC reports.

The trustee will appoint a committee to represent the interest of the creditors and stockholders in trying to develop a plan of reorganization. The plan must be accepted by the creditors and stockholders and confirmed by the court. The court may confirm a plan if it is rejected by the stockholders and creditors if the court finds that the plan treats everyone fairly.
Q: Isn’t it true that someone can only file for bankruptcy once every seven years?

A: No. This is a common misinterpretation of the rule. The court will deny a discharge if the debtor received a discharge under chapter 7 or chapter 11 in a case filed within 8 years before the second bankruptcy petition is filed or if the debtor previously received a discharge in a chapter 12 or chapter 13 case that was filed within 6 years before filing the second case. If the debtor can show that all the unsecured claims in the earlier case were paid in full or the debtor made payments totaling 70 percent of the allowed secured claims and the plan was proposed in good faith and the payments represented the best efforts of the debtor, the debtor may not have to wait that long for a second discharge. A debtor is not eligible for discharge under chapter 13 if he or she received a prior discharge in chapter 7, 11, or 12 case filed within 4 years before the current case was filed or in a chapter 13 case filed two years before the current case.

There are other strategies that debtors can utilize, as well. For example, you can file a Chapter 7 to discharge those debts that are dischargeable, and file a subsequent Chapter 13 to repay those debts that were not discharged in Chapter 7.
Q: Can a business get a discharge?

A: If you are operating your business as a sole proprietor, you may still be entitled to a discharge. But corporations and other business entities are not entitled to a discharge.

A sole proprietor should keep in mind, though, that a bankruptcy filing must include all of the debtor entity’s debts, regardless of how or why they were incurred. So it would be difficult for a sole proprietor to treat business debts separately from his or her personal finances. The assets of a sole proprietorship, like business equipment or receivables, are property of the bankruptcy estate unless they are claimed exempt or abandoned by the trustee in a Chapter 7. But it may be possible to classify business debts separately and pay them in full in a Chapter 13, if necessary to continue to use vendors. An individual debtor can also reaffirm debts.
Q: What happens to my corporation if I file personal bankruptcy?

A: Since the corporation is a legal entity different and distinct from its shareholders, the bankruptcy of a stockholder does not affect the corporation. But the bankrupt shareholder’s shares in the corporation are an asset of his or her bankruptcy estate. The value of the shares in the hands of the bankruptcy estate is a function of:

• The share’s marketability
• The percentage interest they represent of the corporation
• The net value of the corporation’s assets

A corporate bankruptcy shouldn’t directly affect the shareholders. If the officers or shareholders are personally liable for the debts of the business, the automatic stay in the corporation’s case doesn’t prevent creditors from trying to collect from others who may be liable.

Stockholders do not have to be notified of a chapter 7 filing because they usually do not receive anything in return for their investment. If creditors are paid in full, the court will notify the stockholders and give them a chance to file claims to whatever is left over.

It makes no difference if you have made an “S” election for your corporation. Such an election is a matter of tax law. For purposes of the bankruptcy laws, an “S” corporation is treated no differently than a “C” corporation. But any taxable income generated by an “S” corporation after bankruptcy may still be taxable to the shareholders, as the corporation isn’t a taxpaying entity.
Q: Can all types of debt be discharged?

A: No. Although the debts that cannot be discharged vary slightly between the different chapters of bankruptcy, the following generally cannot be discharged:

• Debts for taxes owed to local, state or federal agencies
• Debts for money, property, services, or an extension, renewal, or refinancing of credit, which was obtained fraudulently
• Debts which were neither listed nor scheduled or which the debtor waived discharge
• Debts which are owed to a spouse, former spouse, or child of the debtor, for alimony, maintenance, or support of such spouse or child, in connection with a separation agreement, divorce decree or other order of a court of record
• Debts owed for willful and malicious injury by the debtor to another person or property owned by another
• Debts for government sponsored educational loans, unless it can be shown that repayment will cause an undue hardship
• Debts for death or personal injury caused by the debtor’s drunk driving or from driving while under the influence of drugs, or other substances
• Debts incurred after the bankruptcy was filed

Q: What happens if a debtor or a creditor doesn’t follow the bankruptcy rules?

A: The bankruptcy rules are very complicated. If a debtor fails to comply with the rules or makes misrepresentations to the bankruptcy court, the court may deny a discharge. Debtors have to be very careful to account for everything and to follow the bankruptcy rules. In the alternative, a bankruptcy court may simply dismiss a bankruptcy, meaning that the debtor would no longer be entitled to protection of the bankruptcy laws. A debtor could even be prosecuted criminally.

Creditors are not immune, either. They may be subject to similar sanctions if, for example, they collude with the debtor to hide assets. A creditor can also get in big trouble with the bankruptcy court for violating the automatic stay.
Q: If they can’t pay their creditors, how do people afford bankruptcy lawyers?

A: Usually a bankruptcy lawyer is going to insist on being paid up front. When people know that filing bankruptcy is inevitable, they can plan ahead to pay their lawyer. This usually involves paying the lawyer at the expense of and with money that might otherwise have gone to pay unsecured creditors. The logic is that, if someone is going to file bankruptcy anyway, it is better to reallocate the resources to pay for good legal representation rather than continue to pay on an unsecured debt that is going to be discharged or structured in the bankruptcy. Usually a bankruptcy lawyer is not even going to be subject to the same rules that apply to creditors, because he or she will be paid a retainer in advance so that the lawyer is not a creditor of the bankruptcy debtor at the time the petition is filed.
Q: Can a debtor give special treatment to certain creditors?

A: Subject to certain defenses, the power to avoid transfers is generally effective against transfers made by a debtor within 90 days prior to filing bankruptcy. Transfers to “insiders” (relatives, general partners, and directors or officers of the debtor) made up to a year before filing can be avoided. Also under 11 U.S.C. 544, the trustee has authority to avoid transfers under applicable state law, which often provides for longer time periods. Check with an attorney in your state to find out the time frame for avoidable transfers before you contemplate filing your bankruptcy petition.
Q: Can a business be forced into bankruptcy?

A: Yes. If enough is at stake, creditors can start an involuntary bankruptcy proceeding against a business. This doesn’t happen too often but it does happen when creditors are concerned that a debtor is squandering or misappropriating assets that should otherwise go to pay debts that are owed to them.

Corporate Bankruptcy

What happens when a public company files for protection under the federal bankruptcy laws? Who protects the interests of investors? Do the old securities have any value when, and if, the company is reorganized? We hope this information answers these and other frequently asked questions about the lengthy and sometimes uncertain bankruptcy process.

How Are Assets Divided in Bankruptcy?

1. Secured Creditors – often a bank, is paid first.

2. Unsecured Creditors – such as banks, suppliers, and bondholders, have the next claim.

3. Stockholders – owners of the company, have the last claim on assets and may not receive anything if the Secured and Unsecured Creditors’ claims are not fully repaid.

Federal bankruptcy laws govern how companies go out of business or recover from crippling debt. A bankrupt company, the “debtor,” might use Chapter 11 of the Bankruptcy Code to “reorganize” its business and try to become profitable again. Management continues to run the day-to-day business operations but all significant business decisions must be approved by a bankruptcy court.

Under Chapter 7, the company stops all operations and goes completely out of business. A trustee is appointed to “liquidate” (sell) the company’s assets and the money is used to pay off the debt, which may include debts to creditors and investors.

The investors who take the least risk are paid first. For example, secured creditors take less risk because the credit that they extend is usually backed by collateral, such as a mortgage or other assets of the company. They know they will get paid first if the company declares bankruptcy.

Bondholders have a greater potential for recovering their losses than stockholders, because bonds represent the debt of the company and the company has agreed to pay bondholders interest and to return their principal. Stockholders own the company, and take greater risk. They could make more money if the company does well, but they could lose money if the company does poorly. The owners are last in line to be repaid if the company fails. Bankruptcy laws determine the order of payment.

What Will Happen to My Stock or Bond?

A company’s securities may continue to trade even after the company has filed for bankruptcy under Chapter 11. In most instances, companies that file under Chapter 11 of the Bankruptcy Code are generally unable to meet the listing standards to continue to trade on Nasdaq or the New York Stock Exchange. However, even when a company is delisted from one of these major stock exchanges, their shares may continue to trade on either the OTCBB or the Pink Sheets. There is no federal law that prohibits trading of securities of companies in bankruptcy.

Note: Investors should be cautious when buying common stock of companies in Chapter 11 bankruptcy. It is extremely risky and is likely to lead to financial loss. Although a company may emerge from bankruptcy as a viable entity, generally, the creditors and the bondholders become the new owners of the shares. In most instances, the company’s plan of reorganization will cancel the existing equity shares. This happens in bankruptcy cases because secured and unsecured creditors are paid from the company’s assets before common stockholders. And in situations where shareholders do participate in the plan, their shares are usually subject to substantial dilution.

If the company does come out of bankruptcy, there may be two different types of common stock, with different ticker symbols, trading for the same company. One is the old common stock (the stock that was on the market when the company went into bankruptcy), and the second is the new common stock that the company issued as part of its reorganization plan. If the old common stock is traded on the OTCBB or on the Pink Sheets, it will have a five-letter ticker symbol that ends in “Q,” indicating that the stock was involved with bankruptcy proceedings. The ticker symbol for the new common stock will not end in “Q”. Sometimes the new stock may not have been issued by the company, although it has been authorized. In that situation, the stock is said to be trading “when issued,” which is shorthand for “when, as, and if issued.” The ticker symbol of stock that is trading “when issued” will end with a “V”. Once the company actually issues the newly authorized stock, the “V” will no longer appear at the end of the ticker symbol. Be sure you know which shares you are purchasing, because the old shares that were issued before the company filed for bankruptcy may be worthless if the company has emerged from bankruptcy and has issued new common stock.

During bankruptcy, bondholders will stop receiving interest and principal payments, and stockholders will stop receiving dividends. 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 old stock in exchange for new shares in the reorganized company. The new shares may be fewer in number and may be worth less than your old shares. The reorganization plan will spell out your rights as an investor, and what you can expect to receive, if anything, from the company.

The bankruptcy court may determine that stockholders don’t get anything because the debtor is insolvent. (A debtor’s solvency is determined by the difference between the value of its assets and its liabilities.) If the company’s liabilities are greater than its assets, your stock may be worthless. Contact your local Internal Revenue Service (IRS) office or call 1-800-829-1040 for information about how to report worthless securities as a loss on your income tax return. If you don’t know whether your stock has value, and you can’t find a stock or bond price in the newspaper, ask your broker or the company for information.

Why Would a Company Choose Chapter 11?

“Prepackaged Bankruptcy Plans”

Sometimes companies prepare a reorganization plan that is negotiated and voted on by creditors and stockholders before they actually file for bankruptcy. This shortens and simplifies the process, saving the company money. For example, Resorts International and TWA used this method.

If prepackaged plans involve an offer to sell a security, they may have to be registered with the SEC. You will get a prospectus and a ballot, and it’s important to vote if you want to have any impact on the process. Under the Bankruptcy Code, two-thirds of the stockholders who vote must accept the plan before it can be implemented, and dissenters will have to go along with the majority.

Most publicly-held companies will file under Chapter 11 rather than Chapter 7 because they can still run their business and control the bankruptcy process. Chapter 11 provides a process for rehabilitating the company’s faltering business. Sometimes the company successfully works out a plan to return to profitability; sometimes, in the end, it liquidates. Under a Chapter 11 reorganization, a company usually keeps doing business and its stock and bonds may continue to trade in our securities markets. Since they still trade, the company must continue to file SEC reports with information about significant developments. For example, when a company declares bankruptcy, or has other significant corporate changes, they must report it within 15 days on the SEC’s Form 8-K.

How Does Chapter 11 Work?

The U.S. Trustee, the bankruptcy arm of the Justice Department, will appoint one or more committees to represent the interests of creditors and stockholders in working with the company to develop a plan of reorganization to get out of debt. The plan must be accepted by the creditors, bondholders, and stockholders, and confirmed by the court. However, even if creditors or stockholders vote to reject the plan, the court can disregard the vote and still confirm the plan if it finds that the plan treats creditors and stockholders fairly. Once the plan is confirmed, another more detailed report must be filed with the SEC on Form 8-K. This report must contain a summary of the plan, but sometimes a copy of the complete plan is attached.

Who Develops the Reorganization Plan for the Company?

Committees of creditors and stockholders negotiate a plan with the company to relieve the company from repaying part of its debt so that the company can try to get back on its feet.

• One committee that must be formed is called the “official committee of unsecured creditors.” They represent all unsecured creditors, including bondholders. The “indenture trustee,” often a bank hired by the company when it originally issued a bond, may sit on the committee.
• An additional official committee may sometimes be appointed to represent stockholders.
• The U.S. Trustee may appoint another committee to represent a distinct class of creditors, such as secured creditors, employees or subordinated bondholders.

After the committees work with the company to develop a plan, the bankruptcy court must find that it legally complies with the Bankruptcy Code before the plan can be implemented. This process is known as plan confirmation and is usually completed in a few months.

Steps in Development of the Plan:

• The debtor company develops a plan with committees.
• Company prepares a disclosure statement and reorganization plan and files it with the court.
• SEC reviews the disclosure statement to be sure it’s complete.
• Creditors (and sometimes the stockholders) vote on the plan.
• Court confirms the plan, and
• Company carries out the plan by distributing the securities or payments called for by the plan.

What is the Role of the U.S. Securities & Exchange Commission in Chapter 11 Bankruptcies?

Generally, the SEC’s role is limited. The SEC will:

• review the disclosure document to determine if the company is telling investors and creditors the important information they need to know; and
• ensure that stockholders are represented by an official committee, if appropriate.

Although the SEC does not negotiate the economic terms of reorganization plans, we may take a position on important legal issues that will affect the rights of public investors in other bankruptcy cases as well. For example, the SEC may step in if we believe that the company’s officers and directors are using the bankruptcy laws to shield themselves from lawsuits for securities fraud.

How Will I Know What’s Going On?

Sometimes, you may first learn about a bankruptcy in the news. If you hold stock or bonds in street name with a broker, your broker should forward information from the company to you. If you hold a stock or bond in your own name, you should receive information directly from the company.

You may be asked to vote on the plan of reorganization, although you may not get the full value of your investment back. In fact, sometimes stockholders don’t get anything back, and they don’t get to vote on the plan.

Before you vote, you should receive from the company:

• a copy of the reorganization plan or a summary;
• a court approved disclosure statement which includes information to help you make an informed judgment about the plan;
• a ballot to vote on the plan; and
• notice of the date, if any, for a hearing on the court’s confirmation of the plan, including the deadline for filing objections.

Even when stockholders do not vote, they should get a summary of the disclosure statement, and a notice on how to file an objection to the plan.

Stockholders may also receive other notices unrelated to the plan of reorganization, such as a notice of a hearing on the proposed sale of the debtor’s assets, or notice of a hearing if the company converts to a Chapter 7 bankruptcy.

What is Chapter 7 Bankruptcy?

Some companies are so far in debt or have other problems so serious that they can’t continue their business operations. They are likely to “liquidate” and file under Chapter 7. Their assets are sold for cash by a court appointed trustee. Administrative and legal expenses are paid first, and the remainder goes to creditors. Secured creditors will have their collateral returned to them. If the value of the collateral is not sufficient to repay them in full, they will be grouped with other unsecured creditors for the rest of their claim. Bondholders, and other unsecured creditors, will be notified of the Chapter 7, and should file a claim in case there’s money left for them to receive a payment.

Stockholders do not have to be notified of the Chapter 7 case because they generally don’t receive anything in return for their investment. But, in the unlikely event that creditors are paid in full, stockholders will be notified and given an opportunity to file claims.

Does My Stock or Bond Have Any Value?

Usually, the stock of a Chapter 7 company is worthless and you have lost the money you invested.

If you hold a bond, you might only receive a fraction of its face value. It will depend on the amount of assets available for distribution and where your debt ranks in the priority list on the first page. If your bond is secured by collateral, your payment will depend in large part on the value of the collateral.

Where Can I Find More Information?

The Company. – Contact the investor relations department in the company’s home office. They can give you more information on the bankruptcy proceeding, including the name, address, and phone number of the court handling the bankruptcy.

Your Broker. – If you can’t find information in the newspaper or the library, or you haven’t received any correspondence from the company, call the person who sold you the investment.

The SEC. – Companies file regular reports with the SEC in a computer database known as EDGAR. For example, a company declaring bankruptcy will file a form 8-K that tells where the case is pending and which chapter of bankruptcy was filed. You can access EDGAR through your computer at: http://www.sec.gov If you don’t have access to a computer, your public library may have a computer you can use. You can also request a copy of Form 8-K, or any other reports that the company files with the SEC, see “How to Request Public Documents“. Or, you can visit the SEC’s Public Reference Room, 100 F Street NE, Washington, DC 20549. You might also be able to get copies of SEC filings from your full-service stockbroker, or the company itself.

Bankruptcy Court. – If the company is in Chapter 7, and has not filed reports with the SEC, or you need more information, the bankruptcy court itself is another source. This court is usually located where the company has its main place of business or where the company is incorporated. (There is at least one bankruptcy court in each state and the District of Columbia.) Once you know a company’s main place of business or state of incorporation, you can obtain the address and phone number of the bankruptcy court for that region by visiting the website of the Administrative Office of the United States Courts or by calling (202) 502-1900. Court addresses and phone numbers are also listed in the publication, The American Bench, which you can find at your local library. In addition, you’ll find links to U.S. Bankruptcy Court websites at http://www.uscourts.gov/bankruptcycourts.html.

U.S. Trustee at the Department of Justice. – The U.S. Trustee has broad administrative responsibilities in bankruptcy cases. Check the U.S. Trustee’s website, your local telephone book, or the public library for the field office closest to you, and contact them for information on the status of the bankruptcy.

A Securities or Bankruptcy Attorney. – You may want to talk to an attorney, especially if you believe that the debtor defrauded you and you want to know your legal options. If you suspect fraud, you should also report it to the SEC or your

For a more detailed discussion of different types of bankruptcy, please read Bankruptcy Basics, which the Bankruptcy Division of the Administrative Office of the United States Courts produced to assist the public in understanding bankruptcy. http://www.sec.gov/investor/pubs/bankrupt.htm

We have provided this information as a service to investors. It is neither a legal interpretation nor a statement of SEC policy. If you have questions concerning the meaning or application of a particular law or rule, please consult with an attorney who specializes in securities law.