Lignin from sugarcane bagasse was extracted using three different methods such as Alkaline, Ethanosolv, and Hydrotropic extraction and the effect of each method on yield and quality of bio-oil obtained when the lignin was depolymerized through solvothermal liquefaction was studied using ethanol as solvent. The maximum lignin yield was obtained in the hydrotropic extraction method when Sodium Xylene Sulfonate was used as the hydrotropic solvent at a concentration of 1.43 M and a temperature of 90 °C. Hydrothermal experiments were performed at temperature of 250 °C with a residence time of 30 min and lignin to ethanol ratio of 1:200 g/mL respectively. Among the methods used, the Ethanosolv lignin showed the highest extent of depolymerization (86.7%) to yield bio-oil at 250 °C with reduced biochar formation at lignin to solvent ratio of 1:200. Biochar obtained was used in adsorption studies of Cadmium (Cd), Lead (Pb), Nickel (Ni), and Zinc (Zn) and results showed that more than 85% removal of all the metals under lower concentration levels.