On January 22, 2002, Kmart Corporation filed voluntary petitions for reorganization under Chapter 11 of the federal bankruptcy laws. While under Chapter 11 protection, Kmart renegotiated its debt, shed some of its non-performing assets, and issued new equity. Financier Eddie Lampert of ESL Investments bought much of Kmart's debt for less than $1 billion while it was in bankruptcy. As part of the reorganization plan, virtually all of Kmart's debt was converted into shares, and ESL Investments emerged as Kmart's largest shareholder. Subsequent to its emergence from bankruptcy on May 6, 2003, Kmart's stock has gone up from around $15/share to nearly $80/share over a period of one year. The case requires students to analyze Kmart's financial performance prior to the bankruptcy, identify the circumstances leading to the bankruptcy, use projected financial statements to derive Kmart's value post-bankruptcy, and explore issues related to Kmart's adoption of Fresh Start reporting upon its emergence from bankruptcy. The case questions fall into five categories: (1) pre-bankruptcy evaluation, (2) reorganization plan and Kmart in bankruptcy, (3) Fresh Start reporting, (4) bankruptcy valuation analysis, and (5) post-bankruptcy performance. The questions are largely independent, allowing instructors the flexibility to adopt only the sections relevant to their courses.