Liquidating assets in
In the simplest terms, this means selling the position for cash; another approach is to take an equal but opposite position in the same security—for example, by shorting the same number of shares that make up a long position in a stock.A broker may forcibly liquidate a trader’s positions if the trader’s portfolio has fallen below the margin requirement, or she has demonstrated a reckless approach to risk-taking.In most cases the cash is intended for paying creditors.Both businesses and private individuals can liquidate their assets, which may include real estate, automobiles, equipment, raw materials and investments.Liquidation can occur regardless of the nature of the asset or the identity of the buyer.Asset liquidation is a way for businesses and individuals to get money for essential purchases.In such cases, investors in preferred stock have priority over holders of common stock.Liquidation can also refer to the process of selling off inventory, usually at steep discounts.
The specific types of property, as well as their maximum value, are defined by state and federal bankruptcy laws.As company operations end, the remaining assets are used to pay creditors and shareholders, based on the priority of their claims. The business is no longer in existence once the liquidation process is complete.Unlike when individuals file for Chapter 7 Bankruptcy, the business debts still exist.Chapter 7, also known as liquidation bankruptcy and available to both private individuals and businesses, allows a court to appoint a trustee who sells off, or liquidates, the bankrupt party's assets and pays the proceeds to creditors.Following liquidation, the court can discharge any remaining debt.
For example, a retired individual may choose to liquidate a stock investment to raise cash for paying household bills.