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Simple English definitions for legal terms
liquidation
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A quick definition of liquidation:
Term: Liquidation
Definition: Liquidation is the process of figuring out how much money a business owes to others and how much money it has to pay them back. This happens when a business is closing down. It's like when you clean your room and count how much money you have in your piggy bank. Sometimes, people also use liquidation to figure out how much money someone owes them or how much they have to pay someone else. This can be done by talking and agreeing on a number, or by going to court to decide.
A more thorough explanation:
Definition: Liquidation is the process of calculating the debts and distributing the assets of a business that is being closed down. It can also refer to determining the cash value of a debt or damage in a legal conflict.
Example 1: When a company goes bankrupt, it may need to go through liquidation. This means that the company's assets, such as property and equipment, are sold off to pay its debts to creditors.
Example 2: In a legal dispute, the parties involved may agree to liquidate the damages or debts involved. This means that they come to an agreement on a specific dollar amount that will be paid to settle the dispute.
Both examples illustrate the process of liquidation, which involves calculating the value of assets or debts and distributing them accordingly. In the case of a bankrupt company, liquidation is necessary to pay off creditors and close down the business. In a legal dispute, liquidation can help the parties involved come to a resolution and avoid further conflict.