Definition - What does Liability mean?
“Liability” can have several meanings in a legal context, primarily:
- Legal liability, which refers to the responsibility that a person or entity owes to another person or entity as a result of the law. Legal liability can result from a myriad of different legal situations such as tort law, contracts, insurance, tax law, etc. Furthermore, legal liability can arise in from both criminal and civil law.
- A liability is something that a person owes financially for or something that they owe money on. Liabilities are items that a person is responsible for in that regard. If a person takes out a loan, for example, they have a liability to repay the loan and they are legally obligated to do so. In terms of debt consolidation, a person would try to amalgamate certain liabilities to create less of them and try to make them more manageable.
Justipedia explains Liability
When a person or entity has a legal obligation to act or omit from acting in a specific manner, and if or when that person or entity breaks its legal obligation, they can be held legally liable. For example, all people who have a job in the United States are required to pay income tax. If a person does not pay their income tax, then they will then face all of the legal liability that comes with not paying their taxes.
If a person is in trouble financially and is forced into bankruptcy, they are legally obligated to list all of their assets in order for a court-appointed representative to review them, and they have to try to find a way to pay the liabilities over a longer time period at a decreased rate. Companies are legally obligated to list all of their financial liabilities for tax purposes and for accounting standards.