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Bankruptcy and Debt Portfolios

  • Winfried Koeniger

    (Queen Mary, University of London)

  • Thomas Hintermaier

    (Institute for Advanced Studies, Vienna (IHS))

We use a heterogeneous-agent model, in which labor income is risky and markets are incomplete, to analyze consumer debt portfolios of secured and unsecured debt in the US. Compared with previous research, we emphasize the role of durables which not only generate utility but also serve as debt collateral. This allows a meaningful joint analysis of secured and unsecured debt and introduces endogenous bankruptcy costs: durables need to be sold to service secured debt in bankruptcy procedures which implies forgone durable utility since adjusting durables is costly. We solve the model numerically and apply it to understand bankruptcy and consumer debt portfolios in the US and their evolution over time.

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Paper provided by Society for Economic Dynamics in its series 2009 Meeting Papers with number 348.

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Date of creation: 2009
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Handle: RePEc:red:sed009:348
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

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  18. Nobuhiro Kiyotaki & Alexander Michaelides & Kalin Nikolov, 2011. "Winners and Losers in Housing Markets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43, pages 255-296, 03.
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