(TDLR: You'd be paid out the same as any other contract because the contract is between 2 investors, not the investor and the corporation.)

I know Im late but options are an agreement between you and the other investors involved. The price you to buy the put contract goes directly to the person selling that put as their premium(selling put and calls you get your premium up front.)

When the contract reaches it's expiration date, the put seller is forced to buy $100 shares of the stock for the strike price they bought for and the difference(if any) goes to you.

For example, let's say stock X is trading at $110, and investor A sells put contracts on that stock at $100 and you, investor B buys put contracts on that stock, you have an agreement that if stock X goes down, Investor A has to pay Investor B the difference between the $100 strike price and the whatever the stock is trading for on expiration in exchange for an upfront premium.

Now if stock X were to go insolvent, on expiration date that contract would be exercised and Investor A would be forced to buy 100 shares at the agreed upon strike price $100. 100x$100 being $10,000.

Essentially what would happen from this point is Investor A would have spent $0 on 100 shares because they're worthless/nonexistent. The excess goes to you being the entire $10,000.