# 2.2.2 Risk and settlement

If the value of an account's outstanding loans exceeds its borrowing capacity, a portion of the outstanding loan can be repaid in exchange for the user's FLIP guarantee, at the current market price less a settlement discount; This incentivizes an ecosystem of arbitrageurs to intervene quickly to reduce borrower exposure and eliminate protocol risk. The ratio eligible to close, a close factor, is the portion of the borrowed asset that can be repaid, and ranges from 0 to 1, such as 25%. The settlement process can continue to be called until the user's loan is less than their borrowing capacity. Any Ethereum address that owns the borrowed asset can invoke the settlement function, exchanging its asset for the borrower's FLIP collateral. Since both users, assets and prices are included in the Flip protocol, settlement is smooth and does not depend on any external system or order books.
