We propose a parsimonious model with adverse selection where delinquency, renegotiation, and bankruptcy all occur in … equilibrium as a result of a simple screening mechanism. A borrower has private information about her cost of bankruptcy, and a …, and thus become delinquent. The lender renegotiates with some delinquent borrowers. In the absence of renegotiation …

. Finally, we find that those debtors who misreported income had a lower probability of default on their debt repayment plans …

specify default, renegotiation and reorganization policies. Renegotiation entails a redistribution of social surplus, while … monitoring is too costly, renegotiation leads to reorganization, which resembles actual bankruptcy practice. We calibrate the …-trivial choice between alternative bankruptcy procedures. Given limited commitment and asymmetric information, financial contracts …

after the financial crisis. We also nd that consumers with a bankruptcy history, a conspicuous signal of higher default risk …

. That selection works against banks; large overdrafts cost more to supply and, if depositors default, banks lose more, so …