We develop a general equilibrium model of wealth transfers in the presence of uncertain lifetimes and default. Without introducing exogenous debt constraints, agents are allowed to make collateral-backed promises at any state of their life span.

P ascoa and Seghir (2009) noticed that when collateralized promises become subject to utility penalties on default, Ponzi schemes may occur. However, equilibrium exists in some interesting cases. Under low penalties, equilibrium exists if the collateral does not yield utility (for example, when...