Tina Jessick's Blog

When a company can no longer pay it’s debts, creditors can sue in bankruptcy court and there’s no agreement, the company is usually liquidated.

Liquidation is the sale of all company assets in attempts to pay back the debt.

Here’s the usual order of payout during a company’s liquidation:

1. Unpaid taxes
2. Secured creditors
3. Unsecured creditors
4. Junior unsecured creditors
5. Preferred stockholders
6. Common stockholders

Usually when it gets to this point, companies rarely make enough to pay creditors in full.

The worst case scenario for the common stockholders is that they receive no compensation at all in bankruptcy…