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When

A cycle can be defaulted once it is past its due date plus the grace period (30 + 3 days). Anyone can call markDefaulted(user); it does not depend on Matocard being online.

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What happens

  1. Collateral shares worth the debt, rounded up, are seized into the lender pool. Shares are seized, not redeemed, so this is instant even if the vault’s withdrawals are queued.
  2. The debt is written off.
  3. Everything above the debt stays yours to withdraw.
  4. The default is counted as a cycle with no repayment, which lowers the score, and stays on the public record.
  5. The account can never draw again, and the identity behind it cannot open another account.

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If the collateral is not enough

Above score 72 a limit can exceed collateral. If such a borrower defaults, all their collateral is seized and the shortfall is written off against the lender pool. That is the lenders’ risk, and the yield fee is its price. See Lender pool.

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What never triggers a default

  • A fall in the vault’s value.
  • The contract being paused. Repayment is never paused, and markDefaulted keeps running, so a pause neither traps anyone nor extends a due date.