If a borrower's health factor goes below 1 or is in overdue condition, borrower's deposited NFT is in the status of pending liquidation, see more in Risk Models: Health factor or Time-based. There will be two possibilities:
A: The first person makes a bid, the liquidation is triggered successfully and the deposited NFT enters the auction process, see more in Liquidations: Auction Design. If no one follows the auction later, the first person will be the winning bidder.
B: No one makes the bid. Liquidation process won't be triggered, the deposited NFT will stay in the pools and become Bad Debt, see more in the Bad Debt.