[Contracts] LoanManager liquidate does not adjust total_outstanding, permanently understating available liquidity

[grantfox-oss]

Telegram (ask questions / claim the issue here first): https://t.me/+DOylgFv1jyJlNzM0

Why this matters

In loan_manager/src/lib.rs liquidate, seized collateral up to total_debt is transferred to the lending pool and apply_debt_recovery reduces the loan's accrued interest/late fee/principal, but total_outstanding is not adjusted on liquidation (unlike repay, check_default, and approve_loan which call adjust_total_outstanding). After liquidation the loan's principal portion remains counted in TotalOutstanding(token), permanently understating available liquidity in approve_loan's pool_balance - total_outstanding check.

Acceptance criteria

• Adjust total_outstanding on liquidation to remove the liquidated loan's outstanding principal, consistent with repay/check_default
• Verify available-liquidity accounting in approve_loan after a liquidation
• Add a test that liquidates a loan and asserts subsequent approve_loan sees the freed liquidity
• Confirm no path leaves TotalOutstanding permanently inflated

Files to touch

• loan_manager/src/lib.rs

Out of scope

• Changing the collateral-to-pool transfer destination
• Bad-debt socialization design

[BigJohn-dev]

I’d like to work on this issue because it aligns closely with the kind of engineering problems I enjoy solving — building reliable, maintainable, and user-focused software. I’m particularly interested in contributing to real-world systems where code quality, scalability, and thoughtful implementation matter.

[gloskull]

Hello, I have 4 years of experience delivering solutions for projects like this, covering backend, frontend, and smart contract development. After carefully reviewing your requirements, I have a clear understanding of the task and am confident in my ability to deliver a clean, efficient, and thoroughly tested solution on time. I prioritize code quality, maintainability, and industry best practices throughout the development process.

[EbukaMoses]

Hello Maintainer,

I’d like to apply to work on this issue.

I’m Ebuka Moses, a full-stack and blockchain developer with experience building, testing, and maintaining smart contracts, particularly using Rust and blockchain-based architectures. I’m comfortable working with contract logic, validation, access control, persistent storage, and event handling, and I always pay close attention to correctness, security, and edge cases.

I take time to fully understand the issue requirements before implementing a solution, and I ensure my work follows the project’s coding standards. I also write clear, well-tested code and submit clean pull requests with meaningful commits.

I’m confident I can deliver a solid solution that meets the acceptance criteria and adds value to the project.

Thank you for your consideration, and I look forward to contributing.

[grantfox-oss]

🦊 GrantFox — @EbukaMoses has been assigned to this issue as part of the Official Campaign campaign!

Next steps:

1. Open a Pull Request referencing this issue (e.g., Closes #15)
2. Your PR will be reviewed by the LabsCrypt maintainers

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