what is the difference between bankruptcy and going into liquidation?

[bubbles4920]

what is the difference between bankruptcy and going into liquidation. my friends hubby had a franchise that made a loss, he took out a personal loan on the premises, a house he owned and turned into a shop downstairs. bailiffs are coming round to his other house he lives in with threats at the moment.i just dont get it, why his debts arent wiped out if he has gone bankrupt??

[Ethel]

Bankruptcy doesn't make debt disappear. If he has assets they will have to be sold to meet his debts.

Bankruptcy is an option if your debts are greater than your assets - there will still be debt after the assets are realised, and this amount will be significantly reduced.

If a person lives in rented accommodation, owns nothing of value and has no savings but massive debts - then the debt is more or less wiped out on bankruptcy.

If it were any other way, everyone would go on a six month world cruise, buy a racy car and live the high life on credit - then declare themselves bankrupt and keep their assets.

[bubbles4920]

thanks for that, so what is liquidation please?

[kempie]

Liquidation is a term applied to companies or partnerships. It involves the realisation and distribution of the assets and usually the closing down of the business.

[bubbles4920]

thanks everyone, very helpful

[themas]

From what you have written it seems that he has personal debts and business debts. If he has gone bankrupt as an individual then he cannot any longer be chased by creditors (or bailiffs) for his personal debts. Also, if the business was not a limited company he would have been personally responsible for the business debts and they should have been included in his bankruptcy.

Your reference to liquidation makes it seem that the business was a limited company. If he has put that into liquidation then dealing with the business debt creditors becomes a matter for the liquidators and he should not be pursued by bailiffs for those debts.

[diannegarcia5]

The different of the two is bankruptcy is an way or option to file when you are going into debt, and liquidation is where you liquidate all your assets and properties whether you are going into bankrupt.