People often need to take out loans in order to finance life choices. Debt is not a bad thing if it is within your budget to pay it back in the future. If you find yourself in a bankruptcy situation, consider debt liquidation.
Bankruptcy
Bankruptcy is a legal declaration of your inability to repay your creditors. Bankruptcy can affect either a person or a corporation. Whether you are filing for personal bankruptcy or corporate bankruptcy, after filing, you must pay your creditors what they are owed.
Creditors
A creditor is any entity that has loaned you something with the assumption that you will return the item in the future. If a bank loans you money, for example, the bank is the creditor. You are expected to repay the loan per your loan repayment plan.
Assets
Assets are anything that you fully own. If you have a house with a mortgage, for example, the house becomes an asset after you have paid off your mortgage in its entirety.
Debt Liquidation
Debt liquidation occurs when you file for bankruptcy. You must find a way to repay your creditors after you file for bankruptcy. Debt liquidation involves you selling your assets for cash and using that cash to repay your creditors.
Example
If you file for personal bankruptcy, for example, and you own a car and have an outstanding bank loan of $2,000, then debt liquidation would involve you selling your car. If you sell your car for $3,000, then you take $2,000 of that and give it to your bank to repay your bank loan.
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