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When used in a financial context, assets refer to any owned item of value. In order to understand and apply for Chapter 7 or Chapter 13 bankruptcy, you will need to fully understand the concept of assets and how they factor into your escape from excess debt. Read on for more details, and be sure to speak to your own bankruptcy attorney about how the following may apply to your filing.

General Definition: The liquidation of assets is the process by which an individual or business sells off property for cash. Liquidation is a necessary step in most types of bankruptcy, and must be performed before your debt can be discharged. Assets can include real estate property, nonessential cars, mechanical equipment and tech supplies, personal possessions, and investments. Importantly, both individuals and businesses can liquidate assets.

Application Within Bankruptcy Filings: Asset liquidation occurs in order to eliminate debt and accumulate money for more essential purchases, such as food, clothing, household bills, or rent. To facilitate the liquidation process, a court will typically appoint a trustee to oversee the sale of assets and payment to creditors. Once liquidation is complete, any remaining debt is discharged by the court.

Exemptions: If you file for Chapter 7 or Chapter 13 bankruptcy and reach the liquidation phase, then it is important that you familiarize yourself with exempt assets—this term typically refers to property that individuals need for day-to-day living and can thus keep, including a home, vehicle, and certain insurance policies.