# Liquidation

#### Liquidation is determined by liquidation collateral factors, which are separate and higher than borrow collateral factors (used to determine initial borrowing capacity), which protects borrowers & the protocol by ensuring a price buffer for all new positions. These also enable governance to reduce borrow collateral factors without triggering the liquidation of existing positions.&#x20;

#### When an account’s borrow balance exceeds the limits set by liquidation collateral factors, it is eligible for liquidation. A liquidator (a bot, contract, or user) can call the absorb function, which relinquishes ownership of the accounts collateral, and returns the value of the collateral, minus a penalty (liquidationFactor), to the user in the base asset. The liquidated user has no remaining debt, and typically, will have an excess (interest earning) balance of the base asset.&#x20;

#### Each absorption is paid for by the protocol’s reserves of the base asset. In return, the protocol receives the collateral assets. If the remaining reserves are less than a governance-set target, liquidators are able to buy the collateral at a discount using the base asset, which increases the protocol’s base asset reserves.
