A liquidation sale is when a company or individual sells all assets to generate cash, often due to bankruptcy. A store may have a clearance sale, and buyers should be aware of initial prices. The cash generated goes to creditors. A government may also hold a liquidation sale, such as an auction of surplus items.
A liquidation sale occurs when a company or individual wishes to generate cash. A company or store might have a retail clearance sale where all merchandise is available. In the event that an individual must liquidate, such as in a bankruptcy liquidation, all assets belonging to that person are usually included in the sale. Sometimes a liquidation is ordered by a court and other times it is voluntary. It usually represents a bankruptcy of some sort and whether there will be a continuation of a business in liquidation will depend on the circumstances.
When a store goes bankrupt, there are several scenarios that could follow. There may be a reorganization plan that will aim to rebuild the business and its finances to a healthy operating scenario. In the other scenario, the business may not be able to be repossessed, which would lead to a liquidation sale. Outlets will most likely advertise and market this out-of-commerce sale, and all remaining merchandise will be sold in stores.
Buyers should be aware that all merchandise is not usually marked with a substantial discount, at least to start with. The retailer may start at the item’s list price, which under some conditions may be higher than before the sale began. Over time, if any items remain unsold, prices will be reduced incrementally. The cash generated by the sale will typically be directed to the bankrupt company’s creditors.
A personal liquidation sale occurs when a bankrupt person is not expected to return to solvency. Similar to a retail liquidation, funds raised from the sale of assets will be directed to creditors so that at least some money is repaid. A bankruptcy judge might designate a court-appointed trustee to handle the sale of items and subsequent repayment to creditors on behalf of the individual debtor. Assets sold, such as a home or vehicle, are usually sold at a steep discount to generate at least some cash.
A government could also sponsor a liquidation sale. This could occur in an auction-like context and could include the sale of surplus items ranging from aircraft parts and scrap equipment to computer accessories. The auction process could take place online in a planned bidding process and buyers often include new and expanding small businesses.
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