Let $\Omega\subset \mathbb{R}^N$ be a domain with $N\ge 2$. Let $K\subset \Omega$ be a compact set and take $u:\overline{\Omega}\to\mathbb{R}$ such that $u$ is Lipschitz and $u=1$ in $\partial K$.
Assume that $\operatorname{int}{K}\ne\emptyset$ and conseider the new function $v:\overline{\Omega}\to \mathbb{R}$ defined by
$$v(x) = \left\{ \begin{array}{rl} 1 &\mbox{ if $x\in \operatorname{int}{K}$} \\ u(x) &\mbox{ otherwise} \end{array} \right. $$
Is $v$ a Lipschitz function?