> ## Documentation Index
> Fetch the complete documentation index at: https://docs.mezzamine.com/llms.txt
> Use this file to discover all available pages before exploring further.

# In the Event of Distress or Default

> How the hedge absorbs stress before collateral action, and the collateral recovery order on default.

Mezzamine's structure is designed to absorb stress through the hedge before any collateral action is required. In declining BTC price environments, hedge positions generate value that becomes available to the program. With lender approval, hedge profits may be used to support scheduled debt service during adverse market conditions.

## Event of default

If a borrower fails to meet their payment obligations or any non-financial covenant, an event of default is triggered. The collateral recovery process follows a defined order:

<Steps>
  <Step title="Hedge margin and realized hedge profits">
    Hedge margin balances and realized hedge profits are liquidated and transferred to the lender first.
  </Step>

  <Step title="Pledged collateral">
    Remaining shortfalls are recovered through liquidation of pledged BTC, hashrate, mining hardware, and other pledged real-world assets.
  </Step>
</Steps>

Mezzamine works collaboratively with borrowers to find resolution before forced liquidation, including through restructuring, refinancing, or asset sales arranged with operating continuity in mind. Where physical hardware liquidation is necessary, specialized data center hardware logistics firms, ASIC manufacturers, and secondary sellers may be engaged for repossession and liquidation logistics.