What It Is:
In the financial world, to liquidate something means to sell it for term often carries a connotation of failure, because it is most often used in discussions about Chapter 7 -- a section of U.S. law under which companies and individuals liquidate their assets in order to repay their debts.. Although this sounds harmless, in the corporate world the
How It Works/Example:
Individuals, partnerships or corporations can liquidate assets. In the case of bankruptcy, when and how a borrower liquidates assets is a big deal. If all the 's assets are tax-exempt or subject to liens, there may not be any assets to liquidate and hence no to distribute to creditors. If there are assets to liquidate, however, the creditors usually file a written claim so they can receive some of the proceeds. The trustee handles the and determines which creditors are paid first.
Why It Matters:
The last step in the effort to repay debt in is usually to liquidate everything. However, the steps preceding usually involve , which -- at the individual level -- virtually ruins a person's for several years, making it very difficult and expensive to borrow .
For businesses, liquidation usually means closing for good and selling off the assets. In the end, if a company's or are deemed worthless by the bankruptcy court, investors might be able to deduct their losses on their tax returns.