Bankruptcy and Delinquency in a Model of Unsecured Debt

74 Pages Posted: 6 Oct 2015

See all articles by Kartik Athreya

Kartik Athreya

Federal Reserve Banks - Federal Reserve Bank of Richmond

Juan M. Sánchez

Federal Reserve Banks - Federal Reserve Bank of St. Louis

Xuan Tam

University of Cambridge - Judge Business School

Eric R. Young

University of Virginia

Multiple version iconThere are 4 versions of this paper

Date Written: 2012

Abstract

At an aggregate level, formal default via bankruptcy and informal default via delinquency are both quantitatively important in consumer credit markets. In this paper, we use a variety of microeconomic data sources to construct a salient set of facts on the use of unsecured debt and both formal and informal default. We then show that these facts, which describe both the cross-sectional and dynamic behavior of borrowing and default, can be well understood through a quantitative model of consumer credit with empirically plausible representations of labor market risks, social safety nets, and debt-default options.

Keywords: Consumer Debt, Bankruptcy, Default, Life cycle, Idiosyncratic risk

JEL Classification: E43, E44, G33

Suggested Citation

Athreya, Kartik and Sanchez, Juan M. and Tam, Xuan and Young, Eric R., Bankruptcy and Delinquency in a Model of Unsecured Debt (2012). FRB St. Louis Working Paper No. 2012-042, Available at SSRN: https://ssrn.com/abstract=2669851

Kartik Athreya (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

Juan M. Sanchez

Federal Reserve Banks - Federal Reserve Bank of St. Louis ( email )

411 Locust St
Saint Louis, MO 63011
United States

Xuan Tam

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

Eric R. Young

University of Virginia ( email )

1400 University Ave
Charlottesville, VA 22903
United States

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