Liquidation is the process of turning assets into cash. Liquidation is performed under Chapter 7 bankruptcy in which the debtor has made the choice to sell assets to pay off creditors.
The process begins when the court appoints a trustee who not only oversees the liquidation, but also distributes the funds to creditors.
Debtors should always reveal all assets in their possession, as hiding any assets from the courts will be seen as fraud and prosecuted as such.
Once all assets are discovered, non-exempt property is sold through various outlets, until it is all converted to cash. Based on the items being liquidated the process can be quick or prolonged.
Many believe that by choosing to liquidate it implies everything will be sold for profit. Both federal and state law prohibits this practice and insures each debtor does not lose everything.