# Liquidation

**Liquidation** occurs when a leveraged position meets at least **one of the following conditions**:

1. [The position is underwater](https://docs.stellaxyz.io/stella-doc/protocol-mechanism/stella-strategy/liquidation#the-position-is-underwater)
2. [The position expires](#the-position-expires)

Liquidators can close a liquidatable position by fully repaying the position’s debt and acquiring the remaining assets at a discounted rate, **denominated in USDC units** (based on the Oracle Price).

## The position is underwater

Debt ratio is a parameter that will help users see how “healthy” or how close the position is to its liquidation point. Stella employs a concept of collateral and borrower credit to calculate debt ratios.

$$
\text{DebtRatio} = \frac{\text{TotalBorrowCredit}}{\text{TotalCollateralCredit}}
$$

If a position in Stella Strategy has a **Debt Ratio** **of over 100%**, it means that the collateral value may not cover the debt (i.e. the borrowed amount) value, implying inability to repay debt. As a result, that position will **become liquidatable.**

## The position expires

To ensure Stella’s ecosystem sustainability, lenders need to be rewarded for allowing their funds to be liquidity sources within a reasonable timeframe. As a result, every position on Stella Strategy will **expire after 30 days since the time of opening**. 

After expiration, the position will become **liquidatable regardless of the current debt ratio**. Its yield will be realized and, if the yield is positive, will be distributed to lenders following the PAYE model.

Stella encourages leveragoors to **monitor their leverage positions closely** and always be aware of their current PnL and the time until position expiration to avoid any undesirable circumstances. 

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