Overdue loans in a Pool can be liquidated by any external actor. The loan collateral is then transferred to the Pool's configured collateral liquidator. After the collateral is sold, the proceeds are remitted to the Pool and used to repay the deposit ticks that funded the loan. Liquidation proceeds are used to repay lower ticks before higher ones, so that the highest ticks will absorb any losses from a shortfall of the loan repayment. If the liquidation results in a surplus beyond the defaulted loan's repayment, the surplus is remitted to the borrower.

The official collateral liquidator is the EnglishAuctionCollateralLiquidator. This liquidator hosts an onchain English Auction, where the highest bid wins the collateral at the highest bid price. This liquidator also supports collateral wrappers, including the BundleCollateralWrapper and ERC1155CollateralWrapper, so that bundled collateral is first unwrapped into individual auctions for each of the bundled token IDs. When all collateral associated with a liquidated loan is sold, the aggregated proceeds are remitted to the Pool.

English Auctions are currently configured for 24 hour duration, 10 minute extension window, 15 minute extension time, and 2% bid spacing.

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