> For the complete documentation index, see [llms.txt](https://debit.teller.org/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://debit.teller.org/how-debit-works/default-and-the-liquidation-auction.md). # Default and the liquidation auction If a loan is neither repaid nor extended before its duration expires, it defaults, and only then. The collateral is sent to a 24-hour Dutch auction. Because loans are over-collateralized, the auction price starts above the outstanding loan amount and decreases linearly over the 24 hours until a liquidator claims the collateral. The loan principal is returned to the lending pool, and any surplus from the auction is shared between the protocol and the pool, which increases the yield earned by the pool's lenders. Liquidation is therefore driven entirely by time and repayment, never by intraday price moves. --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter, and the optional `goal` query parameter: ``` GET https://debit.teller.org/how-debit-works/default-and-the-liquidation-auction.md?ask=&goal= ``` `ask` is the immediate question: it should be specific, self-contained, and written in natural language. `goal` is optional and describes the broader end goal you are ultimately trying to accomplish on behalf of the user. GitBook uses it to tailor the answer towards what is most useful for that goal. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.