Bankruptcy Liquidation Facts

Bankruptcy liquidation is a process involved in certain types of bankruptcy. If you file for a Chapter 7 bankruptcy you will usually not have to go through bankruptcy liquidation. With other types of bankruptcy, though, you usually will have to go through bankruptcy liquidation.

What is Bankruptcy Liquidation?

Liquidation is the process of selling your assets to get money to repay debts. You are allowed certain assets under the bankruptcy laws that are exempt from liquidation. In most cases this will include your home, one vehicle and your personal possessions.

Assets that could be liquidated include additional vehicles, homes or property and personal possessions that are of monetary value. The rule of bankruptcy liquidation is what often keeps people from filing bankruptcy. You can lose many assets when you file for bankruptcy if they are not exempt.

How Does Liquidation Happen?

Bankruptcy liquidation is part of the process of filing for bankruptcy. It is led by the court. Your assets that you listed as non-exempt when filing for bankruptcy will be assessed and any deemed valuable will be sold. The money from the sale of assets will be used to pay your creditors.

Through the process of bankruptcy liquidation the goal is to pay off your debts. That usually does not happen. You will end up with less debt. That debt will either be discharged or you will have to make a repayment plan to pay it back through the bankruptcy court.

Who Must Liquidate?

Under any bankruptcy you may face liquidation, but the new bankruptcy laws make filing for Chapter 7 and having enough assets to liquidate nearly impossible, so if you qualify for a Chapter 7 then you will not likely end up having to liquidate anything.

Other Things to Know

An important point to note about bankruptcy liquidation is that you can not bypass it. You can not sell your assets beforehand or transfer them into someone else's name. If you are caught you will face sever penalties and problems with the bankruptcy court.

You should make sure you report all assets on your bankruptcy paperwork. The court will find out what you own. You should also try to file under the type of bankruptcy that offers you the most exemptions. States each have their own exemptions as does the federal government and you can choose either exemptions list whichever works best for your situation.