Wall Street usually goes into a panic mode when a well known company
starts talking bankruptcy. Everybody that's holding a share heads to the
back door at the same time. Again, a smart investor will watch the panic
and wait out the blood-bath.

You can find penny stocks in chapter 11 in all of the major financial newspapers.
They will have a symbol beside their listing that designates bankruptcy
status. There are also newsletters that follow companies in bankruptcy. A
bankruptcy stock should be researched just like any other stock.

Send off for the annual and quarterly reports. Look for large companies
that have sales in the $300-400 million dollar range. Stay away from
companies that have more debts to repay than they do sales. A situation
like that is very hard to overcome.

Stick with companies that were previously listed on the NYSE. The listing
requirements for trading on the NYSE are the most stringent of all of the
exchanges. A company with a past of trading on the NYSE is likely to be
much better known than stocks trading on the lesser exchanges.

Look for companies that have well known name brand product lines and
services. The product is more likely to continue to sell well even though
the company is having a hard time. This can make all the difference in
the world when it comes to the survival of the company.

I like to see new management come in and take over the operations of a
company in bankruptcy reorganization. The company has to be turned
around quickly so that it can pay it's debts. If the old management failed
to make money in the past don't think they'll do any better in the future.

The new management has to be able to make the company show a profit.
It's a simple concept. If the company fails to show a profit it's not very
likely that it will survive to prosper again. I just can't stress enough the
importance of having a good management team in place. It's crucial.

A company files a reorganization plan after it goes into chapter 11. The
debtor and the creditors try to come to an agreement on how repayment
of debt will occur. If everyone agrees the reorganization will be confirmed.
Confirmation is positive sign. This news alone can raise share prices.