Definition

• A Chapter 11 bankruptcy is more a reorganization than a removal of the business. The courts allow the business to continue to exist, but with a new effort at making profits. It is a second chance at creating a revenue stream. This differs from a Chapter 7 bankruptcy that ends a company and leaves shareholders with nothing. A Chapter 11 bankruptcy is more complex, but stockholders are often allowed to keep or trade their shares even after the Chapter 11 bankruptcy has been filed.
  
  

Listing Standards

• Listing standards are basic rules that major stock listings, such as the New York Stock Exchange or Nasdaq, require of the companies that trade there. If a company cannot meet these standards, it cannot trade in the common stock markets. Most businesses that enter Chapter 11 bankruptcy can no longer meet these requirements and so stockholders cannot trade their shares through these frequently-used channels.
  
  

Federal Law

• No federal law prohibits stockholders who own shares in a business in Chapter 11 bankruptcy from trading stock. What they lack is access to popular markets. As a result, these stockholders can only use smaller markets, such as the electronic Pink Quote or the online OTCBB trading forums.
  
  

Old Stock

• When a company reorganizes under a Chapter 11 bankruptcy, it often creates new stock to trade. The old company stock stays with the investors who held it, but is marked with an additional "Q" to signify that it belongs to a bankrupt company. This old stock can be traded until the company cancels it.
  
  

Considerations

• Companies usually cancel shares while the Chapter 11 process is taking place, leaving the shareholders without stock. Some companies may switch old shareholders to their new stock, but even this process typically ends with stockholders holding diluted shares.