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We empirically investigate the determinants of successful debt restructurings for a sample of 116 financially distressed companies in Germany between 1997 and 2004. Of the sampled firms, about half successfully restructure their debt in a workout while the other half fail and file an insolvency petition under the new bankruptcy code. Our evidence suggests that firms more likely to succeed in their restructuring attempt are higher leveraged, owe more debt to banks, and exhibit higher going concern values. Bankruptcy, on the other hand, is more likely for firms with defi-cient lender coordination and high fractions of collateralized debt. Analysis of stock returns over the entire restructuring interval reveals that the market uses similar information to predict successful workout attempts and that shareholders fare sig-nificantly better if bankruptcy is ultimately avoided