Difference between Liquidation and Bankruptcy?

Question

Difference between Liquidation and Bankruptcy?

Answer 1

Liquidation is selling everything to raise capitol.  That means all inventory and assets such as plant and equipment and generally the company goes out of business once everything is liquidated.  Bankruptcy on the other hand means that the corporation can't pay it's bills and they seek protection from the court under bankruptcy law from their creditors.  The court stops all payments to all creditors and organizes a plan fo the business to become profitable again and sets a schedule of who will get paid and when.  Generally this means that creditors will not get paid all that they are owed, but all will get something and once the company emerges from bankruptcy it continues operating normally.