Could have seen this coming. Management warned you it was coming. Yet so many investors looked the other way.

Ambac (NYSE: ABK) filed for bankruptcy yesterday afternoon, ending a saga of mortgage insurance that began unraveling in 2007.

A Wisconsin insurance regulator seized part of Ambac's assets earlier this year in an attempt to provide fairness to the company's policyholders. The ability for Ambac's operating subsidiaries to make dividend payments to its parent company -- that the company shareholders own -- was essentially wiped out after the seizure, rendering the public business mostly useless. Ambac's annual report warned that it "has insufficient capital to finance its debt service and operating expense requirements beyond the second quarter of 2011 and may need to seek bankruptcy protection." After defaulting on its debt last week, that's exactly what happened.

What now? There's been rampant talk lately that fallacious mortgages underwritten by banks such as Bank of America (NYSE: BAC) and Citigroup (NYSE: C) might give bond insurers an out, allowing them to force banks to buy back billions of dollars in soured assets.

For some solvent monoline insurers like MBIA (NYSE: MBI), that could still be the case. But for Ambac, know this: The gig is up. The company is bankrupt. Shares aren't worth the paper they're written on. It's over.

Every time a public company goes bankrupt, a gaggle of die-hard shareholders hangs on, hoping their fortunes could still turn or, worse, confusing a penny stock with the bargain of a lifetime. It happened with General Motors. It happened with Lehman Brothers. It happened with Washington Mutual. In all these cases, shares eventually disappeared into nothingness.  

Don't get caught in the same trap. Ambac shares don't have any value anymore. If I were holding shares this morning, I'd get what I could for them, count my losses, and move on.

Fool contributor Morgan Housel owns shares of Bank of America preferred stock. The Fool owns shares of Bank of America. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.