Discussion Paper
When the Household Pie Shrinks, Who Gets Their Slice?
Abstract: When households face budgetary constraints, they may encounter bills and debts that they cannot pay. Unlike corporate credit, which typically includes cross-default triggers, households can be delinquent on a specific debt without repercussions from their other lenders. Hence, households can choose which creditors are paid. Analyzing these choices helps economists and investors better understand the strategic incentives of households and the risks of certain classes of credit.
Keywords: household finance; household debt; default; debt prioritization; mortgages;
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Bibliographic Information
Provider: Federal Reserve Bank of New York
Part of Series: Liberty Street Economics
Publication Date: 2025-03-06
Number: 20250306