Liquidation Bankruptcy Law and Legal Definition

Liquidation bankruptcy refers to a bankruptcy proceeding filed under chapter 7, title 11 of the Bankruptcy Code. Bankruptcy filed under Chapter 7 is the most common type of bankruptcy proceeding. In a Chapter 7 case, the bankruptcy trustee gathers and sells the debtor's nonexempt assets and uses the proceeds of such assets to pay the creditors in accordance with the provisions of the Bankruptcy Code. This is also termed as Straight Bankruptcy.