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Liquidating the assets

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Liquidation generally refers to the process of selling off a company’s inventory, typically at a big discount, to generate cash.

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If you've found yourself overextended with your credit, you may be tempted to liquidate your long-term savings, such as cash values on life insurance policies and your 401(k) or IRA accounts, to pay off debt.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.Once all the assets have been sold, the business is shut down.In the accounting world, liquidation refers to the process of selling all of a company’s assets to generate cash to pay off creditors, or anyone the company owes money to. Other business assets that could be liquidated include: Liquidation sales often occur as part of a bankruptcy filing, but not necessarily.Because cash is already a liquid asset, there is no need to liquidate it to pay creditors.

However, all non-cash assets can be converted into cash for the purpose of paying debt or making purchases.

Every successful business owner is well aware of the challenges associated with starting up a business, but few consider the difficulties of closing one after they have been in business for some time.

Finding someone to purchase an existing business is often hard, if not impossible, and succession plans can require years of additional work.

After the buyout, Rapp, a manager in the technology industry in Columbus, Ohio, was asked to take a 10 percent pay cut, along with his co-workers."That in itself was survivable," says Rapp.

His wife then experienced a difficult third pregnancy and after a couple of hospital stays, delivered the baby 14 weeks early in the spring of 2009.

Medical bills quickly ate up the maximum on their health insurance, and there were child care expenses for their two older children while the Rapps stood vigil at the hospital.