Call to declareInsolvent() would revert when contract status reaches liquidation point after repayment of credit position 1

[code423n4]

Lines of code

https://github.com/debtdao/Line-of-Credit/blob/audit/code4rena-2022-11-03/contracts/modules/credit/LineOfCredit.sol#L143
https://github.com/debtdao/Line-of-Credit/blob/audit/code4rena-2022-11-03/contracts/modules/credit/LineOfCredit.sol#L83-L86

Vulnerability details

Impact

The modifier whileBorrowing() is used along in the call to LineOfCredit.declareInsolvent(). However this check reverts when count == 0 or credits[ids[0]].principal == 0 . Within the contract, any lender can add credit which adds an entry in credits array, credits[ids].

Assume, when borrower chooses lender positions including credits[ids[0]] to draw on, and repays back the loan fully for credits[ids[1]], then the call to declareInsolvent() by the arbiter would revert since it does not pass the whileBorrowing() modifier check due to the ids array index shift in the call to stepQ(), which would shift ids[1] to ids[0], thereby making the condition for credits[ids[0]].principal == 0 be true causing the revert.

Proof of Concept

1. LineOfCredit contract is set up and 5 lenders have deposited into the contract.
2. Alice, the borrower borrows credit from these 5 credit positions including by calling LineOfCredit.borrow() for the position ids.
3. Later Alice pays back the loan for credit position id 1 just before the contract gets liquidated
4. At the point where ids.stepQ() is called in _repay(), position 1 is moved to ids[0]
5. When contract status is LIQUIDATABLE, no loan drawn on credit position 0 and arbiter calls declareInsolvent() , the call would revert since credits[ids[0]].principal == 0

Tools Used

Manual review

Recommended Mitigation Steps

The modifier whileBorrowing() would need to be reviewed and amended.

[c4-judge]

dmvt marked the issue as primary issue

[c4-judge]

dmvt marked the issue as selected for report

[c4-judge]

dmvt changed the severity to 3 (High Risk)

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kibagateaux marked the issue as sponsor confirmed

[c4-judge]

dmvt marked the issue as satisfactory