Legal Question in Bankruptcy in Illinois

Whether you are entitled to a portion of the proceeds depends on what was sold and by what process, but the answer is you are probably not entitled to anything.

First, the words "going bankrupt" are not a technical description of what happened to the company. People often use the term loosely to describe not only a corporate liquidation under the Bankruptcy Act, but also a sale of assets by the company's secured creditor under the Uniform Commercial Code, an assignment for the benefit of creditors or even merely becoming insolvent and shutting the company down voluntarily.

Whether the company liquidated in a formal bankruptcy proceeding or disposed of its business through a UCC sale, an ABC or simply closed down, the creditors are typically entitled to all of proceeds unless the proceeds actually exceeded the amount of the debt, which is almost never the case. In fact, in many cases the secured creditors (those who have liens on the assets) get all the proceeds and the remaining creditors, who are unsecured, get nothing.

Assuming that your investment in the company was an equity position (a stockholder in a corporation or a member in an LLC), it is very unlikely that you are entitled to any proceeds.

Of course, it is always possible that the specific facts will show that you are entitled to a portion of the proceeds, but I would not count on it.