Liquidating loan definition

In the end, if a company's stock or bonds are deemed worthless by the bankruptcy court, investors might be able to deduct their losses on their tax returns.

liquidating loan definition-79

The trustee handles the liquidation and determines which creditors are paid first.

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 in the future.

For businesses, liquidation usually means closing for good and selling off all the assets.

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.

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.

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.

For businesses, liquidation usually means closing for good and selling off the assets.

If all the debtor's assets are tax-exempt or subject to liens, there may not be any assets to liquidate and hence no money to distribute to creditors.

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