At least twelve major corporations have filed for bankruptcy this year. This is more than the total number who have filed over the last four years. This well supports the current state of our economy and is a sign of things to come. Almost half of these companies were in the financial or construction sector. These are the groups that have been hit hardest this year. IndyMac Bancorp, Inc. was the biggest hit and rocked the economy the most.

It is expected that this rise in bankruptcy will continue throughout the year, based on high debt levels, a weak economy, and rising raw material costs.

When examining a company, always consider a credit downgrade by a major rating agency as an indication of a problem in the corporate structure. This is not necessarily a signal for failure, but is an indication that trouble exists and a warning that this may not be a good investment at this time.

Moody’s Investment Services is a key player in evaluating the credit reliability of corporations. They have recently downgraded several companies, including AMR Corp, the parent company of American Airlines.

Before deciding to become a shareholder in a company that has filed for bankruptcy, be aware of the risks you are taking. A company who files for Chapter 11 protection has its shares de-listed from a specific exchange, but may continue to trade over the counter while in reorganization. The Securities and Exchange Commission (SEC) wants to make consumers aware of the fact that stock of companies who have filed bankruptcy is a very risky investment. When a company is liquidated, realize that the last people to be paid are the stockholders. There is almost never any money left for them and it is necessary that a consumer making an investment in a nearly bankrupt company realize the risk that they are taking.

Before investing your hard-earned money, thoroughly investigate the company and it’s credit rating. This will save you from making a poor investment for your future.

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