Liquidation

Category: finance

The process of selling a business’s or individual’s non-exempt assets, converting them to cash to pay off creditors.

Liquidation is the "end of the road." Unlike a reorganization, there is no attempt to save the business. It is a pure math exercise performed by a trustee: gather the assets, auction them off, pay the secured lenders first, and distribute whatever pennies are left to the unsecured pool.

Common Examples

• The board of directors concluded that the brand had zero market value left, opting for a complete liquidation of the physical inventory.
• A forced liquidation often results in fire-sale prices, meaning unsecured creditors rarely recover more than five percent of their outstanding invoices.