Debts liquidated include those with a known amount that is currently owed and are not in dispute by either the debtor or creditor. However, unliquidated debts are unknown, in conflict, and dependent upon future events.
It can be challenging to understand the term liquidation. For example, you may have liquidated the debt when you pay off your credit card debt. However, this is not the same as liquidated debt. Additionally, property liquidation occurs if real property is seized to pay off your outstanding balance.
What is liquidated debt, and what is unliquidated debt?
Both agree that a liquidated debt is known to you and your creditor. On the other hand, unliquidated debt is a debt whose amount is unclear or disputed. Various factors can result in a question mark amount. Ultimately, however, each debt must be liquidated before it can be paid off.
In addition, it is essential to know the status of each debt when filing for bankruptcy. Please clearly describe the debt to avoid a lengthy email tennis match.
Debt and liquidation, as well as reasons why a debt may be considered unliquidated, will be discussed in this article.
As a first step, let’s examine some examples of liquidated debt and unliquidated debt.
Liquidated and unliquidated debt examples

A liquidated debt occurs when you know and agree with what your creditor or vendor is asking for. An example of a liquidated debt would be:
- You have not paid an invoice.
- You accept the credit card statement as accurate.
Sometimes, the amount of a liquidated debt can be determined by an agreement between the debtor and the creditor or by a court order.
An unliquidated debt is debt that cannot be repaid, has to wait for certain events before you know the amount owed, or is contingent upon possible outcomes. Examples of unliquidated debt are as follows:
- Usually, your defense attorney will ask for a percentage of the damages you win at trial. You do not know what the judge will award you, so you need to know how much you owe the lawyer.
In the case of a car accident, your insurance company may sue you for recovery of the expenses incurred by the victim if you were at fault. You can’t know how much will be payable until the victim has received all the necessary treatments. During this time, the eventual amount you will pay is unliquidated.
These differences are summarized below.
Liquidated Debt
- Known amount
- The debtor and creditor agree on the amount
- Debt is owed at present
Unliquidated Debt
- Unknown amount
- Parties dispute the amount
- Debt is contingent on a future occurrence
The reasons for unliquidated debt
You may encounter unliquidated debt even if you are always on top of your finances. Unavoidable circumstances can lead to unliquidated debt, for example:
- Debts that are disputed
- Contingent debts
- A court order is pending
Let’s examine each of these reasons in more detail.
Debts that are disputed
Whenever you request a credit report from one of the major reporting bureaus or when a debt collector contacts you to collect the money you do not recognize, you may encounter errors in consumer debt records. The creditor or the bureaus may be able to challenge the incorrect information on your behalf legally.
It is considered unliquidated when the amount is investigated until both parties agree. The dispute process is relatively simple if you have the correct sample dispute letter.
Contingent debts
You may only know how much you owe once certain events occur. For instance, if you cosign a loan for a friend, you know you will be liable for repayments if the friend fails to keep up. These ‘if’ debts are contingent because they depend on events outside your control, so you need to know whether they will default and how much you will have to pay if they do.
An order from the court is pending
Sometimes, you may have to wait for a court decision regarding what you owe. This may occur if a creditor sues you. Although you may know the amount the creditor is suing for, the decision ultimately rests with the judge.
Does it matter whether a debt has been liquidated or not?

Unliquidated debts cannot be sued by debt collectors
It is easier to collect liquidated debt than unliquidated debt. The debt collector must contact you to request payment of 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.
Unliquidated debts must be proved that the collector has the legal right to collect the money and provide documentation to support the amount claimed. The debt collector or creditor cannot obtain a default judgment if the amount is not specified.
Due to the additional steps requiring separate court hearings, collectors may delay suing you until the debt is repaid.
Bankruptcy is complicated by unliquidated debt
It is essential to know what to expect during the bankruptcy process when filing for bankruptcy.
The trustee determines unsecured creditors’ payments pro-rata when filing for chapter 7 bankruptcy. In other words, they are entitled to a percentage of the available funds. A bankruptcy trustee can only prorate the amount such creditors receive if the amount owed is known.
Furthermore, it is the trustee’s responsibility to recover money from your debtors to pay your creditors during the insolvency process. Therefore, they should know how much you owe to determine how much each creditor receives.
In Conclusion
Generally speaking, a liquidated debt is one whose amount is known and accepted.
Unliquidated debt, on the other hand, is a debt whose amount is uncertain, either due to a dispute or to the occurrence of future events.
There is a difference between filing for bankruptcy and collecting debt, depending on whether the amount owed is known or unknown. While it is easier for creditors and debt collectors to sue you if your debt is liquidated, unliquidated debt can be more challenging to collect.