There are many reasons why anyone can owe a debt at any point in time. Sometimes, these debts can become worrisome, and as a result, you may need to consider some options like selling some assets. When your creditors put you under pressure, selling your assets becomes a good option. When you have a debt to pay, but you need to sell assets to pay your debt, you are experiencing liquidation bankruptcy. Here’s all you need to know about liquidation bankruptcy.
- What is a liquidation bankruptcy?
As the name implies, liquidation bankruptcy is the type of bankruptcy at the liquidation stage. At this stage, there’s no way to rearrange, consolidate the debts that you owe. The best option is to look to your assets to help pay off the debt. To go through the process of liquidation bankruptcy, you need to visit a bankruptcy court. In the court, a trustee will be chosen to make sure that debt repayments are made in the correct order. By the way, meet the leading bankruptcy lawyer located in Kingsport, TN.
- How does liquidation bankruptcy work?
As we mentioned earlier, you have to file a case for liquidation bankruptcy in court. The trustee is appointed to ensure the repayment follows a standard process called the rule of absolute priority. In this rule, debts with some form of security get attended to first, while the debts without security get paid later. Debt with a guarantee means a debt with collateral. These types of debt get paid first before attending to any other debts.
- How do you qualify for liquidation bankruptcy?
Liquidation bankruptcy means losing all your assets. To follow liquidation bankruptcy, you have to be an individual, a small enterprise, or a corporation. If it’s a business or corporation, you can file for liquidation bankruptcy in court. You follow the same process of asset sales even as an individual. Although there are some other types of bankruptcy, like chapter 11 bankruptcy, you can try. Liquidation bankruptcy, on the other hand, is usually called chapter 7 bankruptcy.
- Advantages of liquidation bankruptcy
Liquidation bankruptcy may not sound so appealing to anyone, of course, because no one likes to lose assets. However, this type of bankruptcy has its advantages. Some advantages include;
- Freedom from debts;
The obvious advantage that comes with chapter 7 bankruptcy is clearing off debts. Owing a debt can put you under intense pressure that you may not even notice. However, when you pay these debts, there’s some peace of mind, regardless of what you lose to pay the debt. So while you’re losing assets, you are gaining peace of mind.
- Trustee involvement
Owing people or companies do a lot of damage to your reputation and personality. People begin to doubt your true nature and have a wrong perception of you. As a result, they may not trust you when you try to explain your financial situation. However, with the involvement of a trustee, they can at least trust the process.
- Secure loan repayment
The secured debts that have collateral attached are often debts from large organizations or financial institutions. This type of debt gets settled fast, which means you don’t have to negotiate with these institutions.