Defaulted

The Defaulted phase is triggered when a borrower fails to make payments within the allowed grace period. Default has serious consequences for the Pool Manager.

How Default Happens

1. The borrower misses a payment — the next due date passes

2. The Pool Manager may apply late fees (18% p.a. penalty)

3. The grace period countdown begins (default: 30 days)

4. If no payment is made before next_due + grace_period, anyone can call check_default()

5. The vault transitions to Defaulted

What Happens on Default

When check_default() is called and the grace period has expired:

1. The vault phase transitions to Defaulted

2. The Pool Manager's collateral is slashed — transferred to a recovery address for investor protection

3. The manager is marked delinquent in the Globals contract (mark_delinquent)

4. The manager's outstanding principal is decremented in Globals

5. A VaultDefaulted event is emitted with the outstanding amount and missed payment count

Consequences for the Manager

• Collateral slashed — The locked collateral for this vault is seized

• Delinquency flag — The manager is flagged as delinquent in Globals

• Blocked from new vaults — The Factory rejects vault creation for delinquent managers

• Requires manual clearing — Only an Operations Admin can call clear_delinquency after review

Default is the most severe outcome. Pool Managers have strong financial incentives to ensure borrower repayment — their own collateral is at stake.

Default is terminal

Once a loan defaults, the phase is terminal — it cannot be renegotiated or returned to Active:

• The Pool Manager's staked collateral is slashed to compensate investors.

• The manager is marked delinquent in Globals, which blocks them from originating new loans until cleared.

• Restructuring is only possible before default — see Renegotiation, which is reachable from the Active phase only.

Relevant Functions

Function	Caller	Description
check_default()	Anyone	Trigger default once the grace period has expired (slashes manager collateral, marks the manager delinquent)