> For the complete documentation index, see [llms.txt](https://docs.bsc.lista.org/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.bsc.lista.org/for-developer/credit-loans/bad-debt-handling.md). # Bad Debt Handling Defaults are recognised on-chain rather than carried at face value, so the loss lands on whoever holds vault shares at the moment of write-off. Write-off is **driven by Lista, not by you**. A `BOT` calls `CreditBroker.liquidate(borrower, posId)`, which calls `Moolah.liquidateBrokerPosition` — and that in turn requires `msg.sender == brokers[id]`, so neither is reachable from a third-party account. (`CreditBroker` also carries a `liquidate(Id, address)` overload that always reverts `not supported`; it exists only to satisfy an interface.) The call reduces the market's outstanding borrow and the vault's total assets in the same transaction, so share price drops immediately and pro-rata. What that means for a depositor: * There is no insurance tranche and no first-loss absorber — current shareholders absorb the full loss. * The compensation for that risk is that performing loans pay well: on an upfront-interest term the borrower owes the **whole term's** interest however early they repay, and an overdue position pays a penalty on top. Since you cannot trigger it, the integration question is how to **detect** one: watch the broker's liquidation events — see [Loan Lifecycle](/for-developer/credit-loans/loan-lifecycle.md) for the event set. --- # 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 by asking a question. Perform an HTTP GET request on the following URL with the `ask` and `goal` query parameters: ``` GET https://docs.bsc.lista.org/for-developer/credit-loans/bad-debt-handling.md?ask=&goal= ``` `ask` is the immediate question: it should be specific, self-contained, and written in natural language. `goal` is what the user is ultimately trying to achieve, the reason they need the answer. Sharing it helps GitBook give you a better, more relevant answer. A goal is most helpful when it describes the outcome the user wants rather than restating the question. For example, with `ask=how do I create an API token`, a goal like `automate deployments from our CI pipeline` lets GitBook tailor the answer to that use case. 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.