> For the complete documentation index, see [llms.txt](https://docs.creditcoop.xyz/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.creditcoop.xyz/developers/v1-developer-material/arbiter-role-v1/liquidate-and-declareinsolvent.md).

# liquidate() and declareInsolvent()

### `liquidate()`

A bespoke approach is taken wish the aim to avoid automatic liquidations. We believe in a process for restructuring debt or in giving borrowers time to top up collateral or add additional revenue streams to the Spigot.

The Arbiter is responsible for initiating and executing liquidations.

This privileged function can only be executed when the loan status is liquidatable, triggered for example when the escrowed token collateral account becomes undercollateralized (relative to the collateral ratio set for the loan) or when a Borrower fails to repay before the deadline.

### `declareInsolvency()`

The Arbiter can declare that a Borrower is incapable of repaying debt any more than the current proceeds after liquidating the Borrower's collateral and/or claiming all of the Revenue Tokens in the Spigot.


---

# 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.creditcoop.xyz/developers/v1-developer-material/arbiter-role-v1/liquidate-and-declareinsolvent.md?ask=<question>&goal=<user_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.