Items that a debtor is allowed to keep are called exemptions and are not liquidated. Exemptions are defined by statute and vary from state to state. Many states allow you to select from state or federal bankruptcy exemptions; some states offer no exemptions.
Liquidation can be used by corporations before or after dissolution. Liquidation can be mandatory or voluntary. A liquidated corporation normally uses the money to given to stockholders who have stakes in the business. In these kinds of cases the liquidation process is treated as a sale or exchange of stock and treated as a capital gain or loss for income taxes.
Liquidation can be mandatory or voluntary. Voluntary liquidation is also called shareholder’s liquidation and is triggered when the members of the company, typically the shareholders, vote to pass a resolution for liquidation. Mandatory liquidation, or creditor’s liquidation, is triggered by a court order. A court with appropriate jurisdiction, or power over the case, can issue the order for liquidation if one of these parties requests such an order:
It is possible for a company to ask for a mandatory liquidation order while at the same time performing a voluntary liquidation. Such a liquidation order could be given if a party within the company is delaying or attempting to halt the voluntary liquidation already begun.
Last Modified: 11-25-2013 02:51 PM PSTLaw Library Disclaimer
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