> For the complete documentation index, see [llms.txt](https://limitless.gitbook.io/rammlend/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://limitless.gitbook.io/rammlend/products/universal-lending-pool/defaults-and-liquidations.md).

# Defaults & Liquidations

### What happens during defaults? 

In collateralized lending pools of money market protocols, defaults normally don't lead to a loss for the pool as the collateral can be liquidated in open markets. RAMM's system does not assume such liquidity for all collateral; if the proposed collateral is indeed illiquid in open markets, a manager would have to decide if there would be enough *external auction interest* when defaults do occur. Otherwise, the redemption price of `longZCB` would be significantly lower than the price at which they bought them. 

**When a liquidation threshold is met, a dutch auction will be triggered to liquidate the collateral**. Any value captured by the auction would be directed back to the lending pool, and the redemption price of `longZCB` would be adjusted in accordance with the added proceeds. 

> Ultimately, it is the interest of the manager to determine whether the pool will stay solvent, given its accepted collaterals or conditions, and whether its interest rate curve fully prices their risk 
>
> **Read more about how our Conditional LendingPool innovates upon existing lending pools in our** [**blog**](https://medium.com/@ramm.fi/ramm-vs-defi-6f8a689494a7) **.** 

### Liquidation threshold 

Based on the [`maxBorrowableAmount`](/rammlend/products/universal-lending-pool/managers-as-oracles.md), a dutch auction will be triggered to liquidate the collateral of the borrower if 

$$
B\_T \* Collateral \ posted \leq BorrowAmount - liquidationBuffer
$$