Is an offset a distribution?

Let's say a participant separates service, leaving behind a $15,000 balance, of which $5,000 is an unpaid loan.

After the loan policy's prescribed time for repayment passes, can that loan be offset immediately if the plan document only allows for lump-sum distributions to terminated participants and there has been no request from the participant for a termination distribution?

I didn't want to add a ton of hypothetical detail to muddy the waters. I apologize if there's not enough here of if this question has been previously discussed.

Does a loan offset count as a distribution such that it can't happen on its own if a plan document only allows lump-sum distributions?

Thanks.

JAS76, if the loan documentation (plan or loan policy provisions, promissory note, security agreement, whatever) states that after acceleration and failure to pay by a certain deadline the plan may foreclose on its security interest, then yes, that can occur in the case of a separated participant and is a distribution for federal income tax purposes.