Liquidated Debt vs. Unliquidated Debt

Edited by Hannah Locklear

The term liquidation can be confusing. For example, you say you have liquidated the debt when you pay off your credit card debt. However, that is not the same as a liquidated debt. Additionally, if real property is seized to pay off your outstanding balance, that's property liquidation.

So what is liquidated debt or unliquidated debt?

Liquidated debt is a debt you owe whose amount is certain, and both you and your creditor agree on the amount. On the flip side, unliquidated debt is debt whose amount is unclear or disputed. Various situations can result in question mark amounts. Eventually, though, each debt needs to be liquidated before you can pay it off.

It's also important to know the state of each debt when filing for bankruptcy because you need to include every debt in the paperwork. Failure to clearly describe the debt can result in a prolonged email tennis game. You don't want that.

This article will explain debt and liquidation, and reasons a debt may be considered unliquidated, and more.

First, let's explore some examples of liquidated debt vs.unliquidated debt.

Examples of liquidated and unliquidated debt

When you know and agree with what your creditor or vendor is asking from you, that's a liquidated debt. An example of a liquidated debt:

• An invoice you haven't paid.
• A credit card statement you accept as correct.

Liquidated debts can be as simple as in the examples above. However, they may sometimes require an agreement between the debtor and the creditor or a court judgment to decide on the amount.

If you disagree on the amount, have to wait for certain events before you know how much you owe, or the amount is contingent on possible outcomes, that debt is unliquidated. A good example of unliquidated debt is:

• The money you owe your defense attorney in case of a car accident. Your lawyer will generally ask for a percentage of the damages you win in court. You don't know what the judge will award you; therefore, you don't know how much you owe the attorney.

Staying with the car accident scenario, if you are at fault and the victim needs medical help and vehicle repairs, their insurance company may sue you to recover the expenses incurred. Until the victim has received all necessary treatments, you don't know the total payable amount. During this waiting period, the eventual money you will pay is unliquidated.

The table below summarizes these differences.

Liquidated Debt vs. Unliquidated Deb

Liquidated Debt	Unliquidated Debt
Known amount	Unknown amount
Debtor and creditor agree on the amount	One or both parties dispute the amount
Debt is owed at present	Debt is contingent on a future occurrence

Reasons for unliquidated debt

Even if you are always on top of your finances, you may still deal with unliquidated debts. Some unavoidable circumstances result in unliquidated debt, such as:

• Disputed debts
• Contingent debts
• Waiting on a court order

Let's take a closer look at each of these reasons for unliquidated debt.

Disputed debts

Errors are common in consumer debt records. You may catch these whenever you request your credit report from the major reporting bureaus or when a debt collector reaches out to collect the money you don't recognize. You can legally challenge the wrong information by filing a dispute with the creditor or the bureaus.

The debt is considered unliquidated when the amount is under investigation until both parties agree. The disputing process is simple if you have the right sample dispute letter.

Contingent debts

You may never know how much you owe until certain events occur. If you cosign a loan for a friend, for instance, you know that you will be liable if the friend fails to keep up with the repayments. However, you don't know if they will default and how much you will need to pay if they do. These 'if' debts are contingent because they depend on matters outside of your control.

Waiting on a court order

Sometimes, you have to wait for the court to decide what you owe. Such a situation may occur if a creditor sues you. You may know the amount they're suing for, but ultimately the decision is with the judge.

So, why is it necessary to know if a debt is liquidated or unliquidated?

Debt collectors may not sue for unliquidated debts

While collecting a liquidated debt is straightforward, collecting unliquidated debt requires more steps. The debt collector has to contact you to ask you to pay for liquidated amounts. If you fail to pay as per the contract, they may sue you and obtain a judgment against you to recover their money through other legal means.

For unliquidated debt, the collector must prove that they can legally collect the money and provide documentation to support the stated amount. The debt collector or creditor can not get a default judgment in the case if the amount is not specified.

As a result of the additional steps requiring separate court hearings and extra costs in filing the claim, collectors may hesitate to sue you until a debt is liquidated.

Unliquidated debt makes bankruptcy more complicated

Filing for bankruptcy is a stressful affair. It helps if you know what to expect through the process.

When filing for a chapter 7 bankruptcy, the trustee determines the amount unsecured creditors receive by pro-rata. That means that they are entitled to a percentage of available funds. Your bankruptcy trustee can't prorate the amount such creditors receive if the amount owed is unknown.

Additionally, it's the trustee's job to recover money from your debtors to pay your creditors during the insolvency. Therefore they need to know how much you owe to determine how much each creditor gets based on the total amount they hope to recover.

In summary

Liquidated debt is a debt whose amount is known and accepted.

On the other hand, unliquidated debt is a debt whose amount is not clear either because it's disputed or because it has to wait for future events to be determined.

Debt collection and filing for bankruptcy may differ depending on whether the owed amount is known or unknown. While it's easier for creditors and debt collectors to sue you for liquidated debt, cases of unliquidated debt are a little more complicated.

If you are being sued for a liquidated debt, the first step to winning your case is to respond with a written Answer. SoloSuit can help you respond to a debt lawsuit in just 15 minutes. Check out this video to learn more:

What is SoloSuit?

SoloSuit makes it easy to fight debt collectors.

You can use SoloSuit to respond to a debt lawsuit, to send letters to collectors, and even to settle a debt.

SoloSuit's Answer service is a step-by-step web-app that asks you all the necessary questions to complete your Answer. Upon completion, we'll have an attorney review your document and we'll file it for you.

>>Read the FastCompany article: Debt Lawsuits Are Complicated: This Website Makes Them Simpler To Navigate

>>Read the NPR story on SoloSuit. (We can help you in all 50 states.)

How to answer a summons for debt collection in your state

Here's a list of guides for other states.

All 50 states.

• Alabama
• Alaska
• Arizona
• Arkansas
• California
• Colorado
• Connecticut
• Delaware
• Florida
• Georgia
• Hawaii
• Idaho
• Illinois
• Indiana
• Iowa
• Kansas
• Kentucky
• Louisiana
• Maine
• Maryland
• Massachusetts
• Michigan
• Minnesota
• Mississippi
• Missouri
• Montana
• Nebraska
• Nevada
• New Hampshire
• New Jersey
• New Mexico
• New York
• North Carolina
• North Dakota
• Ohio
• Oklahoma
• Oregon
• Pennsylvania
• Rhode Island
• South Carolina
• South Dakota
• Tennessee
• Texas
• Utah
• Vermont
• Virginia
• Washington
• West Virginia
• Wisconsin
• Wyoming

Guides on how to beat every debt collector

Being sued by a different debt collector? Were making guides on how to beat each one.

• Absolute Resolutions Investments LLC
• Accredited Collection Services
• Alliance One
• Amcol Clmbia
• American Recovery Service
• Asset Acceptance LLC
• Asset Recovery Solutions
• Associated Credit Services
• Autovest LLC
• Cach LLC
• Cavalry SPV I LLC
• Cerastes LLC
• Colinfobur
• Covington Credit
• Crown Asset Management
• CTC Debt Collector
• Cypress Financial Recoveries
• Delanor Kemper & Associates
• Eagle Loan of Ohio
• Educap
• Estate Information Services
• FIA Card Services
• Forster & Garbus
• Freshview Solutions
• Fulton Friedman & Gullace LLP
• Harvest Credit Management
• Howard Lee Schiff
• Hudson & Keyse LLC
• Integras Capital Recovery LLC
• Javitch Block
• Jefferson Capital Systems LLC
• LVNV Funding
• Mannbracken
• Mariner Finance
• Medicredit
• Michael J Adams PC
• Michael J Scott
• Midland Funding LLC
• Mullooly, Jeffrey, Rooney & Flynn
• Mountain Land Collections
• MRS Associates
• National Collegiate Trust
• Nationstar Foreclosure
• Northstar Capital Acquisition
• NCEP LLC
• NRC Collection Agency
• OneMain Financial
• Palisades Collection LLC
• Pallida LLC
• Paragon Revenue Group
• Pinnacle Collections Agency
• PMAB LLC
• Portfolio Recovery Associates
• Provest Law
• PYOD LLC
• Reunion Student Loan Finance Corporation
• Revenue Group
• Regents and Associates
• RSIEH
• Salander Enterprises LLC
• Second Round Sub LLC
• Security Credit Services
• Sherman Financial Group
• Suttell and Hammer
• T-Mobile
• Transworld Systems
• Tulsa Teachers Credit Union
• UCB Collection
• Velo Law Office
• Velocity Investments
• Waypoint Resource Group
• Weinberg and Associates
• Wolpoff & Abramson

Win against credit card companies

Is your credit card company suing you? Learn how you can beat each one.

• Bank of America
• Capital One
• Chase
• Credit One Bank
• PayPal Synchrony Card
• SYNCB/PPEXTR
• Synchrony Bank
• Target National Bank
• Wells Fargo

Going to Court for Credit Card Debt — Key Tips

How to Negotiate Credit Card Debts

How to Settle a Credit Card Debt Lawsuit — Ultimate Guide

Get answers to these FAQs

Need more info on statutes of limitations? Read our 50-state guide.

Why do debt collectors block their phone numbers?

How long do debt collectors take to respond to debt validation letters?

What are the biggest debt collector companies in the US?

Is Zombie Debt Still a Problem in 2019?

SoloSuit FAQ

If a car is repossessed, do I still owe the debt?

Is Portfolio Recovery Associates Legit?

Is There a Judgment Against Me Without my Knowledge?

Should I File Bankruptcy Before or After a Judgment?

What is a default judgment?— What do I do?

Summoned to Court for Medical Bills — What Do I Do?

What Happens If Someone Sues You and You Have No Money?

What Happens If You Never Answer Debt Collectors?

What Happens When a Debt Is Sold to a Collection Agency

What is a Stipulated Judgment?

What is the Deadline for a Defendants Answer to Avoid a Default Judgment?

Can a Judgement Creditor Take my Car?

Can I Settle a Debt After Being Served?

Can I Stop Wage Garnishment?

Can You Appeal a Default Judgement?

Do I Need a Debt Collection Defense Attorney?

Do I Need a Payday Loans Lawyer?

Do student loans go away after 7 years? — Student Loan Debt Guide

Am I Responsible for My Spouses Medical Debt?

Should I Marry Someone With Debt?

Can a Debt Collector Leave a Voicemail?

How Does Debt Assignment Work?

What Happens If a Defendant Does Not Pay a Judgment?

How Does Debt Assignment Work?

Can You Serve Someone with a Collections Lawsuit at Their Work?

What Is a Warrant in Debt?

How Many Times Can a Judgment be Renewed in Oklahoma?

Can an Eviction Be Reversed?

Does Debt Consolidation Have Risks?

What Happens If You Avoid Getting Served Court Papers?

Does Student Debt Die With You?

Can Debt Collectors Call You at Work in Texas?

How Much Do You Have to Be in Debt to File for Chapter 7?

What Is the Statute of Limitations on Debt in Washington?

How Long Does a Judgment Last?

Can Private Disability Payments Be Garnished?

Can Debt Collectors Call From Local Numbers?

Does the Fair Credit Reporting Act Work in Florida?

The Truth: Should You Never Pay a Debt Collection Agency?

Should You Communicate with a Debt Collector in Writing or by Telephone?

Do I Need a Debt Negotiator?

What Happens After a Motion for Default Is Filed?

Can a Process Server Leave a Summons Taped to My Door?

Learn More With These Additional Resources:

Need help managing your finances? Check out these resources.

How to Make a Debt Validation Letter - The Ultimate Guide

How to Make a Motion to Compel Arbitration Without an Attorney

How to Stop Wage Garnishment — Everything You Need to Know

How to File an FDCPA Complaint Against Your Debt Collector (Ultimate Guide)

Defending Yourself in Court Against a Debt Collector

Tips on you can to file an FDCPA lawsuit against a debt collection agency

Advice on how to answer a summons for debt collection.

Effective strategies for how to get back on track after a debt lawsuit

New Hampshire Statute of Limitations on Debt

Sample Cease and Desist Letter Against Debt Collectors

The Ultimate Guide to Responding to a Debt Collection Lawsuit in Utah

West Virginia Statute of Limitations on Debt

What debt collectors cannot do — FDCPA explained

Defending Yourself in Court Against Debt Collector

How to Liquidate Debt

Arkansas Statute of Limitations on Debt

Youre Drowning in Debt — Heres How to Swim

Help! Im Being Sued by My Debt Collector

How to Make a Motion to Vacate Judgment

How to Answer Summons for Debt Collection in Vermont

North Dakota Statute of Limitations on Debt

ClearPoint Debt Management Review

Indiana Statute of Limitations on Debt

Oregon Eviction Laws - What They Say

CuraDebt Debt Settlement Review

How to Write a Re-Aging Debt Letter

How to Appear in Court by Phone

How to Use the Doctrine of Unclean Hands

Debt Consolidation in Eugene, Oregon

Summoned to Court for Medical Bills? What to Do Next

How to Make a Debt Settlement Agreement

Received a 3-Day Eviction Notice? Heres What to Do

How to Answer a Lawsuit for Debt Collection

Tips for Leaving the Country With Unpaid Credit Card Debt

Kansas Statute of Limitations on Debt Collection

How to File in Small Claims Court in Iowa

How to File a Civil Answer in Kings County Supreme Court

Roseland Associates Debt Consolidation Review

How to Stop a Garnishment

Debt Eraser Review

Do Debt Collectors Ever Give Up?

Can They Garnish Your Wages for Credit Card Debt?

How Often Do Credit Card Companies Sue for Non-Payment?

How Long Does a Judgement Last?

​​How Long Before a Creditor Can Garnish Wages?

How to Beat a Bill Collector in Court