# Liquidation

### Introduction to Adequancy Ratio

_**Adequacy Ratio**_ is the liquidation point on Liqee.

Allowing your debt position to fall below the minimum _**Adequacy Ratio**_ will result in part of your collateral being liquidated with a discount, which will help lenders against financial loss.&#x20;

![](https://4059305791-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-MhrIwyKJyTQ-zqMzw66%2F-MhrPYly_u9-2lNFmF7D%2F-MhrPkCMVf25YBYGGPgD%2Fadequacy%20ratio.png?alt=media\&token=9f4d9fa3-05f5-4e33-87fb-c726e7541e1b)

```
〖Amount〗_col : supplied asset amount as collateral
〖Price〗_col : collateral asset price in USD
〖LTV〗_col : collateral asset loan to value, in range [0,1}
〖Amount〗_loan : borrowed asset amount
〖Price〗_loan : borrowed asset price in USD
〖BorrowFactor〗_loan : borrowed asset borrow factor, in range {0,1]
```

### How do you deal with loan default?


Borrowers need to lock up supported assets in a smart contract as collateral to support your crypto loan. If the loan failed to satisfy the _**Adequacy Ratio**_ and there was no top-of of collateral or timely repayment, part of your collateralized asset will be auctioned to repay your loan.&#x20;

Please note a liquidation penalty will be charged to ensure timely payback (as a bonus to liquidators). So, we strongly recommend you to exercise caution and carefully monitor your debit position to avoid liquidation, by refinancing or terminating your loans in time.

### How much is the liquidation bonus?

On Liqee, liquidation bonus is 10% for all assets supported.&#x20;

### How to participate in liquidation?

Liquidation on Liqee is open to everyone who repays defaulted loans for borrowers and receive a nice bonus for doing so, which helps to keep the system solvent and robust.&#x20;

You can liquidate **up to 50%** of selected collateralized asset for a defaulted loan in a single liquidation transaction.
