If a lender manages his loans properly, then he will be able to be properly compensated for his time/effort necessary to liquidate the collateral that was securing the loan (and often actually end up being compensated very generously when borrowers default).
that's really not the point, though. lenders are in the business of lending in return for interest + principal. they aren't in the business of speculating on collateral defaults---some may enjoy that aspect, but some (probably most) do not. i would have no interest in that if i were to lend here.
The reason a lender will ask for collateral is to protect themselves in the event of a default. If the lender has no interest in owning/selling the subject of the loan then he should not be making the loan in the first place.
I would assume that BitcoinBoss666 wants to get his name cleared of being a scammer, and I would ask you how he should go about doing that. I would assume that you would respond in saying that he should repay the loan that he defaulted on, however once BitcoinBoss666 repays the defaulted loan he would then be owed the collateral that has more likely then not since been sold, which would make the lender a scammer when he cannot produce the collateral.
Should BitcoinBoss666 be forced to forfeit the collateral he provided even if he repays the loan? Should BitcoinBoss666 be forever be labeled a scammer over a $25 loan?