Process of resolving a defaulted loan, typically running 12–36 months and ending in one of four outcomes: (i) covenant waiver/amendment with concessions (waiver fee, +25–100 bps spread, tighter covenants), (ii) restructuring (maturity extension, principal haircut, debt-for-equity swap, lender takes the keys), (iii) Chapter 11 reorganization, or (iv) liquidation/Section 363 sale. Senior secured first-lien recoveries average ~70% in middle-market workouts versus ~20–40% for second-lien/mezzanine.