By GRETCHEN MORGENSON

Individual investors can feel powerless when their stock investments go awry. But sometimes it pays to fight back.

Consider the case of Breitburn Energy Partners, a company with oil and gas properties in the United States that is structured for tax advantages as a master limited partnership. Hammered by the collapse in energy prices, Breitburn stopped making income distributions on its common units in fall 2015. Then it filed for bankruptcy in May, saying it had $4.7 billion in assets and $3.4 billion in liabilities on its balance sheet.

Since it ceased making distributions, Breitburn’s publicly traded partnership units have collapsed from around $2 each to 26 cents. That is a disastrous decline, but it pales before the potential hit from a whopping tax bill, a result of the company’s plan to restructure its debts in bankruptcy. In such a deal, the taxman considers the amount of debt forgiven by a company’s creditors to be a form of income granted to its unit holders.

This is known as cancellation-of-debt income. And court documents show Breitburn’s holders could owe taxes of approximately $14 on each unit they hold…

…Fearing just this outcome, Mr. Myrick and a throng of other small investors hired lawyers to help them win a role in the restructuring process. How they prevailed is instructive…

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