DifferenceBetween.com

Compare and Discern the Clear Difference Between Any Similar Things

Home » Difference Between Liquidation and Bankruptcy

Difference Between Liquidation and Bankruptcy

May 21, 2011 Posted by Olivia

Liquidation vs Bankruptcy

Bankruptcy and liquidation have become common terms today. When a person has become insolvent that is when he cannot repay debts he has taken from sundry creditors and he is under duress because of threats from creditors, there is one option under the law that he can exercise to wriggle out from such a depressing scenario. It is called bankruptcy and is a legal procedure that protects one from the clutches of creditors and helps him to meet the financial exigencies in a controlled manner. Liquidation is another term that is used for a similar procedure. People remain confused between the two terms and cannot make out the differences. This article will highlight these differences and help readers analyze the circumstances in which these terms are applied.

First and foremost, while the term bankruptcy is limited to individuals, liquidation takes place only in the case of companies. Liquidation also differs in the sense that assets of an insolvent company are sold to pay the debts taken from creditors. In liquidation, a company finally comes to its end whereas an individual, even after bankruptcy can make a restart. In some cases bankruptcy and liquidation may be voluntary while in others creditors may demand these procedures to recover their dues.

Both bankruptcy as well as liquidation has a demoralizing effect. An individual may be required to forego his possessions such as car and home whereas all assets of a company are sold to recover the dues of creditors.

In the case of a company, liquidation proceedings begin when its creditors pass a resolution to this effect. The affairs of the company then pass on into the hands of an administrator. Another person known as liquidator is appointed who takes the responsibility of safeguarding the interest of the creditors. He sells the assets of the company, and also investigates into the reasons of failure of the company. The liquidator decides on the order according to which creditors start to receive their money. Secured creditors are the first to receive their money while next in line are unsecured creditors. Shareholders are the last to receive their money. If even after selling all the assets, money is not sufficient to pay back all the creditors, money is divided into the proportion of their stakes and returned to them.

In brief:

Liquidation vs Bankruptcy

• While the sole purpose of both bankruptcy and liquidation is to save the entity from the clutches of creditors, bankruptcy is reserved for individuals while liquidation is applied on companies.

• Bankruptcy gives a chance to an individual to make a fresh start in life but liquidation formally brings a company to its end.

Related posts:

Difference Between Bankruptcy and Insolvency Difference Between Bond and Debenture Difference Between Shares and Bonds Difference Between IVA and Bankruptcy Difference Between Administration and Liquidation

Filed Under: Finance Tagged With: Administrator, Bankruptcy, creditors, debts, insolvent, liquidation, liquidation and bankruptcy, liquidator, Secured creditors, shareholders, unsecured creditors

About the Author: Olivia

Olivia is a Graduate in Electronic Engineering with HR, Training & Development background and has over 15 years of field experience.

Leave a Reply Cancel reply

Request Article

Featured Posts

Difference Between Alzheimers and Dementia

Difference Between Alzheimers and Dementia

Difference Between Which and What

Difference Between Which and What

Difference Between To and For in English Grammar

Difference Between To and For in English Grammar

Difference Between Then and Than in English Grammar

Difference Between Then and Than in English Grammar

You May Like

Difference Between Idioms and Colloquialisms

Difference Between Idioms and Colloquialisms

Difference Between Medicare and Private Health Insurance

Difference Between Warrant and Bench Warrant

Difference Between Warrant and Bench Warrant

Difference Between Samsung Captivate Glide and iPhone 4S

Difference Between Samsung Captivate Glide and iPhone 4S

Difference Between Cuttlefish and Squid

Latest Posts

  • Difference Between Ribozymes and Protein Enzymes
  • Difference Between Biotin and Keratin
  • Difference Between Pergola and Verandah
  • Difference Between Cacophony and Dissonance
  • Difference Between Progenitor and Precursor Cells
  • Difference Between Verandah and Balcony
  • Home
  • Vacancies
  • About
  • Request Article
  • Contact Us

Copyright © 2010-2018 Difference Between. All rights reserved. Terms of Use and Privacy Policy: Legal.