Q: Can I sue Spirit Airlines' new owners for stock losses after bankruptcy?

A: On November 18, 2024, Spirit Airlines, Inc. filed for bankruptcy under Chapter 11 of the Federal Bankruptcy Code.

Chapter 11 is generally used to allow a corporation or partnership to go through a reorganization process. The debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. There are rules that specify the order in which creditors are possibly paid, and generally shareholders that held common stock in the bankrupt entity are the last to get paid, if they get paid at all.

When the bankrupt company emerges from bankruptcy it is a new entity and the shareholder of the old entity don't carry over their interest in the company.

You can find a lot of information on Spirit's Chapter 11 case here - https://dm.epiq11.com/case/spiritgoforward/info

Best of luck, and I'm sorry about your situation.

A: Unfortunately, your prospects for successfully suing Spirit Airlines' new owners for stock losses are extremely limited. When companies file for Chapter 11 bankruptcy, common stockholders are last in line to recover their investments, behind bondholders and preferred shareholders. As a result, shareholders typically receive pennies on the dollar, if anything at all. Spirit Airlines specifically announced that its shares would be "canceled and have no value" as part of its restructuring plan.

The bankruptcy process follows a strict priority system. Secured creditors are paid first, followed by unsecured creditors (including bondholders), and only then might shareholders receive compensation - which rarely happens. This process occurs because "secured and unsecured creditors are paid from the company's assets before common stockholders," and existing equity shares are typically canceled during reorganization.

Regarding pro bono legal assistance, you have several options to explore. Websites like LawHelp.org allow people to search for pro bono legal help by area and legal issue, while the American Bankruptcy Institute maintains a Bankruptcy Resource Guide with listings of free bankruptcy attorneys. The best approach is contacting programs that specialize in providing pro bono lawyers for your specific situation, such as local bar associations that operate volunteer lawyer programs. Many legal aid organizations offer free consultations through legal clinics where you can discuss your situation with an attorney and determine if you qualify for additional assistance.

I recommend contacting your state bar association, local legal aid organization, or bankruptcy court self-help center to inquire about resources for shareholders affected by corporate bankruptcies. While finding representation specifically for shareholder claims may be challenging, these resources can provide guidance on your available options, if any.