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Simple English definitions for legal terms
liquidation bankruptcy
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A quick definition of liquidation bankruptcy:
Liquidation bankruptcy is a type of bankruptcy where a person or business sells off their assets to pay off their debts. This is also known as Chapter 7 bankruptcy. It is usually used when a person or business has no way to pay off their debts and needs a fresh start. In this process, a trustee is appointed to sell off the assets and distribute the proceeds to the creditors. Once the process is complete, the person or business is no longer responsible for the debts that were discharged.
A more thorough explanation:
LIQUIDATION BANKRUPTCY
Liquidation bankruptcy is a type of bankruptcy where a debtor's assets are sold to pay off their debts. This is also known as Chapter 7 bankruptcy.
- John filed for liquidation bankruptcy and had to sell his car and house to pay off his debts.
- Sarah's business went bankrupt and she had to liquidate all of her inventory to pay her creditors.
These examples illustrate how liquidation bankruptcy works. In both cases, the debtors had to sell their assets to pay off their debts. This is because in liquidation bankruptcy, the debtor's assets are used to pay their creditors. Once all the assets are sold and the creditors are paid, the debtor's remaining debts are discharged.