We propose a simple 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 lender may use random contracts to screen different types...

Since 1989, creditor countries have provided debt relief to developing countries worth more than 100 billion US dollars. Prominent lobby groups are campaigning for a further 400 billion US dollars in debt relief to be provided in the near future. How much could developing country’s gain...