Acknowledgment of Debt – What is it?

An individual may find themselves not being able to pay one or more of their creditors and such creditor may upon the discussion of payment terms, ask such an individual to enter into something called an “Acknowledgment of Debt.”

What is a so called Acknowledgment of Debt and what does signing one actually mean?


What is it?

An Acknowledgment of Debt is a contract which both a debtor and creditor sign acknowledging that a debtor is indebted to the creditor and for how much as well as setting out the payment terms of paying off the debt owed.

The Terms

All Acknowledgment of Debts may not be identical as the terms will vary between different debtor-creditor relationships and these terms will be set out in the contract.

Certain terms will however be seen frequently and will be mentioned here below to assist someone in identifying an Acknowledgment of Debt:

  • Legal costs and interest – Usually there will be a terms related to how interest and legal costs will be paid to the creditor;
  • Payment terms and period – the term of payment as well and the instalment value is usually included in an Acknowledgment of Debt;
  • Breach – a breach clause explaining how a breach of the payment terms will be dealt with by the creditor;
  • Acknowledgment – there will be some form of acknowledgement as to the fact that the debtor owes the creditor monies;

Liquid Document

The one thing which most people do not understand is that the signing of an Acknowledgment of Debt means that by admitting liability to the creditor, upon a breach of the Acknowledgment of Debt, a creditor can approach a court with a Provisional Sentence action based on the Acknowledgment of Debt alone, without setting out all the material terms of how the debt has arisen, in an attempt to have a court grant judgment against the debtor for the debt which was acknowledged in the Acknowledgment of Debt.


Should you find yourself in a situation wherein you are requested to sign an Acknowledgment of Debt, feel free to contact us for assistance in entering into such a contract. Alternatively, should you wish to have an Acknowledgment of Debt drafted in an attempt to recover a debt, give us a call.