What Is the Practical Difference between a “Bankruptcy Price” and a “Liquidation Price”?

The liquidation price is the market price at which a trader's margin balance drops to the maintenance margin level, triggering the liquidation process. The bankruptcy price is the theoretical price at which the trader's margin balance hits zero, meaning the position's loss equals the initial margin and any remaining equity.

The exchange aims to execute the liquidation at or near the liquidation price, ideally before the bankruptcy price is reached, to ensure no negative equity is incurred.