# Debt Recovery

## Auto-Liquidation Mechanism:

In the Fused Trade Ledger (FTL), debt recovery is managed exclusively through an **auto-liquidation mechanism**, which is triggered when a debt reaches its expiry.

* $$\text {Expiry time = current time + 7days in secs}$$ 

when a debt expires, it can be blacklisted by any user, and the collateral is absorbed into the liquidity pool. The user who blacklists an expired debt, referred to as the **liquidator**, earns **Nitro Points** as a reward, which can be converted to the protocol’s token.

### Debt Timeline

<figure><img src="/files/xHx84ksNBehsY4xXZJbq" alt=""><figcaption></figcaption></figure>

### **Debt Rollover: A Countermeasure to Blacklisting**

[<mark style="color:purple;">Debt rollover</mark>](/ftl/protocol-overview/protocol-maths.md#debt-rollover) is a mechanism that allows borrowers to extend their debt’s maturity date to avoid liquidation. By paying a minimal rollover fee, the borrower resets the debt’s expiry countdown to the default term of **7 days**.

## **Debt Statuses:** Market-Driven States

Due to market price fluctuations, debts may transition through several states before reaching expiry. These statuses influence repayment and rollover eligibility:

* **Active Debt**:

  A debt outside the buffer range is considered active. Active debts can be repaid or rolled over without restrictions.<br>

* **Greyed debt**

  If market price shifts bring the debt within the [<mark style="color:purple;">buffer range,</mark>](/ftl/protocol-overview/protocol-maths.md#buffer-range) it becomes “greyed.” Greyed debts cannot be rolled over, but they can still be repaid.

  <div data-gb-custom-block data-tag="hint" data-style="success" class="hint hint-success"><p><a href="/pages/QRYUAP308FoMOxGD6hsp#buffer-range"><mark style="color:purple;">Buffer Range:</mark></a> <span class="math">±bins</span>, indicating the range (bins) on either side of the active bin functioning as a safeguard to preserve liquidity for swaps and prevent liquidity depletion due to borrowing activities</p></div>

* **Inactive debt**

  A debt is considered inactive if price movements cause a reversal, where a debt borrowed below the active price crosses above, or vice versa. Inactive debts cannot be repaid or rolled over, but the expiry countdown continues.

  <div data-gb-custom-block data-tag="hint" data-style="success" class="hint hint-success"><p><strong>Trigger Points</strong>:</p><ul><li>debt borrowed below the active price become inactive when: <span class="math">P_{active} ≤P_{borrow}</span>.</li><li>debts borrowed above the active price become inactive when: <span class="math">P_{active}≥P_{borrow}</span>.</li></ul></div>

<figure><img src="/files/hyctXCk1X0qjYSFCgfzl" alt="" width="563"><figcaption></figcaption></figure>


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