What happens to corporate bonds when a company goes bankrupt?
Bondholders are secured by the assets of the company. So they get paid before the regular stockholders. That said, if the assets of the company are much less than the liabilities, there is not enough money to go around, so the bondholders (and the stockholders) get nothing. Normally, the bondholders get a percentage of the face value. Many bonds of companies that investors think could easily go into bankruptcy trade about 20-30 cents on the dollar of face value. But they still get the original amount of interest, as long as the company is not in bankruptcy.
