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To liquidate assets means to convert non-liquid assets into liquid assets by selling them on the open market. An individual or company can voluntarily liquidate an asset, or can be forced to liquidate assets through the bankruptcy process.

Voluntary liquidation can happen when the individual or business needs cash to either fulfill other investment or non-investment obligations, or to reallocate funds, etc.

Liquidating assets in the bankruptcy process can happen when a creditor liquidates a debtor’s assets to collect debt. This process usually is handled by a court officer, often a sheriff, through power given by a writ of execution from the court. The sheriff would first take the assets of a debtor through garnishment. If the asset is non-liquid, the sheriff  will sell it, usually in a public auction in the court, and will give the creditor the owed cash from this sale, while the rest goes back to the debtor.

[Last updated in July of 2020 by the Wex Definitions Team]