liquidate

verb liq·ui·date \ ˈli-kwə-ˌdāt \
Updated on: 13 Oct 2017

Definition of liquidate

liquidated; liquidating
transitive verb
1 a (1) :to determine by agreement or by litigation the precise amount of (indebtedness, damages, or accounts)
(2) :to determine the liabilities (see liability 2) and apportion assets toward discharging the indebtedness of
b :to settle (a debt) by payment or other settlement
  • liquidate a loan
2 archaic :to make clear
3 :to do away with especially by killing
  • was hired to liquidate a certain businessman
4 :to convert (assets) into cash
  • liquidated his securities
intransitive verb
1 :to liquidate debts, damages, or accounts
2 :to determine liabilities (see liability 2) and apportion assets toward discharging indebtedness

liquidation

play \ˌli-kwə-ˈdā-shən\ noun

Examples of liquidate in a Sentence

  1. The owners were ordered to liquidate the company and pay their creditors.

  2. The company is liquidating its assets.

  3. The owners were ordered to liquidate.

  4. The film is about a professional killer who's hired to liquidate a powerful businessman.

Recent Examples of liquidate from the Web

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'liquidate.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

Origin and Etymology of liquidate

Late Latin liquidatus, past participle of liquidare to melt, from Latin liquidus


Financial Definition of LIQUIDATE

liquidate

What It Is

In the financial world, to liquidate something means to sell it for cash. Although this sounds harmless, in the corporate world the term often carries a connotation of failure, because it is most often used in discussions about Chapter 7 -- a section of U.S. bankruptcy law under which companies and individuals liquidate their assets in order to repay their debts.

How It Works

Individuals, partnerships or corporations can liquidate assets. In the case of bankruptcy, when and how a borrower liquidates assets is a big deal. 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. If there are assets to liquidate, however, the creditors usually file a written claim so they can receive some of the proceeds. 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.

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


liquidation

What It Is

Liquidation refers to the selling of assets in return for cash.

How It Works

The term liquidation is most often used in discussions about Chapter 7 bankruptcy -- a section of U.S. bankruptcy law under which companies and individuals liquidate their assets in order to repay their debts.

Individuals, partnerships or corporations can liquidate assets. Here's how liquidation works in the case of bankruptcy.

Individuals
To file Chapter 7, the debtor files a petition with the local bankruptcy court. (In some cases, creditors can force a debtor into Chapter 7 by filing the petition themselves.) The debtor must provide the court with financial and tax information, as well as a list of creditors and outstanding debts. In most cases, the court also requires proof that the individual has obtained credit counseling. Filing the Chapter 7 petition automatically stops most collection actions against the debtor, including lawsuits, garnishments, and phone calls.

The U.S. trustee (or the court itself, in some states) then appoints an impartial trustee to handle the case and liquidate the debtor's assets. 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. If there are assets to liquidate, however, the creditors usually file a written claim so that they can receive some of the proceeds. The trustee handles the liquidation and determines which creditors are paid first.

Ultimately, a judge decides whether to discharge an individual's debt. The judge can deny the discharge if the debtor failed to keep adequate records, failed to explain the loss of any assets, committed a crime, disobeyed court orders, or did not seek credit counseling. Alimony, child support, and student loans generally cannot be discharged in a Chapter 7 case, nor can most judgments against the debtor for criminal acts.

Businesses
The procedure for filing Chapter 7 bankruptcy is very similar for businesses. Public companies must also file a form 8-K with the SEC to notify shareholders of the bankruptcy proceedings.

Most companies do not file Chapter 7 until they've been unsuccessful with a Chapter 11 filing, which lets them attempt to restructure the company and restore the ability to service debt. In Chapter 7, a company ceases operations, and the appointed trustee liquidates the company's assets in order to repay its debts.

Lenders whose debt is backed by collateral are generally repaid first (via the receipt of the collateral), followed by the unsecured lenders and then the shareholders. In many cases, unsecured bondholders receive only pennies on the dollar. Shareholders almost never receive anything.

Why It Matters

Liquidation is usually the last step in the effort to repay debt. 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 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.


LIQUIDATE Defined for English Language Learners

liquidate

verb

Definition of liquidate for English Language Learners

  • business : to sell (a business, property, etc.) especially to pay off debt

  • : to pay all the money owed for (a debt)

  • : to destroy (something) or kill (someone)


Law Dictionary

liquidate

verb liq·ui·date \ ˈli-kwə-ˌdāt \

legal Definition of liquidate

liquidated; liquidating
transitive verb
1 :to determine by agreement or litigation the precise amount of; also :to settle (a debt) by payment or other adjustment
2 a :to determine the liabilities and apportion the assets of especially in bankruptcy or dissolution
  • liquidate a corporation
— compare bankruptcy
b :to convert (as assets) into cash
  • liquidate an estate
intransitive verb
:to liquidate something (as a corporation)

liquidation

play \ˌli-kwə-ˈdā-shən\ noun


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