What is a bankruptcy auction?

A bankruptcy auction, also known as a liquidation auction, is when the assets of a company in liquidation are sold through an auction to raise funds for creditors before the business is closed. Due to the time-sensitive nature of company liquidation, bankruptcy auctions often present a unique opportunity to buyers.

In addition to selling business assets on behalf of a company in liquidation, repossessed assets, such as property or cars from a bankrupt individual may also be sold at a bankruptcy auction to help pay off debts. Such assets may have been repossessed due to a breach of contractual obligations or a loan default.

Chris Bristow, a business debts expert at Real Business Rescue, a corporate insolvency and restructuring provider for company directors, explains why company assets are sold at a bankruptcy auction and why this route is popular for buyers.

Why are company assets sold at a bankruptcy auction?

A bankruptcy auction is a valuable tool for companies in liquidation as it enables them to realise asset value and raise urgent funds to settle creditor debts and bring the business to a close. Bankruptcy auctions are popular with buyers as assets are sold at a competitive price and are often cheaper than the retail price.

This route is also popular with sellers as prospective buyers are thoroughly vetted to ensure that they qualify as genuine buyers, so following the drop of the gavel and the exchange of official contracts - the sale is immediate.

Selling company assets through a bankruptcy auction is often faster than a traditional sale, making it a popular route for buyers and sellers. A range of specialist auctioneers serve the insolvency sector and support insolvency professionals through their auction expertise.

What are the benefits of buying and selling at a bankruptcy auction?

While the primary aim is to realise asset value quickly and efficiently to raise funds for creditors and clear business or personal debts, this route is equally beneficial for buyers.

There are a host of benefits for buying and selling at a bankruptcy, or liquidation auction, such as:

Competitively priced assets

As company liquidators look to raise funds for creditors as a matter of urgency, they are often priced with this in mind to complete a quick sale at market value. Commercial assets on sale can range from machinery, stock, equipment and vehicles to real estate. Physical assets can vary in condition, from new, nearly new and used, to good.

Wide range of assets

Due to the varied nature of companies that enter liquidation, the range of assets for sale at a bankruptcy liquidation is diverse and covers several sectors.

Fast and efficient sale process

As auctions are designed to facilitate a sale on the spot, the process is highly efficient and takes a fraction of the time compared to a traditional sale. The time before an auction is valuable, as much of the housekeeping and legwork in preparation of the auction is carried out during this stage, rather than after, as with a traditional sale.

Interested parties are invited to submit queries and book viewings before the auction. Auction catalogues are distributed, and previews are often held to advertise assets, drum up interest and increase physical or virtual attendees.

Promotes sustainability

Buying assets owned by a previous owner supports the cycle of sustainability. In addition, assets that would otherwise be classed as waste are reused.

A bankruptcy auction is an accessible tool for companies in liquidation and individuals in bankruptcy, along with parties searching for quality business assets for an affordable price.