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Why It Matters The last step in the effort to repay debt in bankruptcy is usually to liquidate everything.

However, the steps preceding liquidation usually involve bankruptcy, which -- at the individual level -- virtually ruins a person's credit for several years, making it very difficult and expensive to borrow money.

Filing the Chapter 7 petition automatically stops most collection actions against the debtor, including lawsuits, garnishments, and phone calls. If all the debtor's assets are exempt or subject to liens, there may not be any assets to liquidate and hence no money to distribute to creditors.

If there are assets to liquidate, however, the creditors usually file a written claim so that they can receive some of the proceeds.

Although this sounds harmless, in the corporate world the term often carries a connotation of failure, because it is most often used in discussions about Chapter 7 -- a section of U. bankruptcy law under which companies and individuals liquidate their assets in order to repay their debts.

How It Works Individuals, partnerships or corporations can liquidate assets.

She has published numerous articles for print and online media including "Grit" Magazine.

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'liquidate.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. What It Is In the financial world, to liquidate something means to sell it for cash.

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In most cases, the court also requires proof that the individual has obtained credit counseling. trustee (or the court itself, in some states) then appoints an impartial trustee to handle the case and liquidate the debtor's assets.

Here's how liquidation works in the case of bankruptcy.

Individuals To file Chapter 7, the debtor files a petition with the local bankruptcy court.

Whether it is a home loan, car loan or student loan, these types of liquidated debts represent an exact dollar amount that must be paid back by the loan's maturity date.

For example, if a bank lends you ,000 on a two-year promissory note, the amount due at the loan's maturity date is clear.

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