Household Debt Restructuring : The Re-default Effects of Debt Suspensions

The HDC can order an immediate repayment or grant a debt suspension. Exploiting the random assignment of bankruptcy filings to managers, we show that a debt suspension has a very significant and negative effect on the likelihood to re-default but that this impact is only short-lived. Five years after the decision—conditionally on not having previously re-defaulted—the probability of re-default is the same whether or not the household benefits from the grace period.