# Default

Credit Vaults prioritise a smooth repayment process, but have mechanisms in place to address potential defaults:

* **Grace Period:** If a borrower misses a scheduled repayment deadline, a **5-day grace period** is provided. During this time, the borrower can settle any outstanding withdrawals and accrued penalties to avoid default.
* **Triggered Auction:** In the event of a default, an automated auction is launched to facilitate debt resolution.
* **Auction Participants:** Only **whitelisted** individuals and institutions can participate in the auction. Whitelisting is achieved through KYC (Know Your Customer) verification and declaration of the bidder's Ultimate Beneficial Owner (UBO). This ensures transparency and protects against malicious actors. The pool borrower is excluded from bidding.
* **Auction Duration:** The auction currently runs for **120 hours (5 days)**, but this timeframe can be adjusted through the platform's governance process in the future.
* **cpToken Holder Vote:** Following the auction, all cpToken holders (essentially lenders) have the power to decide the outcome:
  * **Reject Bid:** If a majority vote rejects the winning bid, cpToken holders retain the right to pursue the borrower legally.
  * **Accept Bid:** If a majority vote accepts the winning bid, cpToken holders redeem their cpTokens for a proportional share of the winning bid amount. However, they relinquish their individual legal rights against the borrower, which transfer to the winning bidder.
* **Winning Bidder Outcome:** If the bid is accepted, the winning bidder receives an NFT representing the legal rights to the pool's debt, granting them the exclusive right to pursue legal action against the defaulted borrower.

Please refer to [Terms & Conditions](/clearpool/terms-and-conditions/restricted-countries.md) for more information.


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