The Right Tool for the Job? Mortgage Distress and Personal Insolvency during the European Debt Crisis
IMF Working Papers, May 5, 2023
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- The Right Tool for the Job? Mortgage Distress and Personal Insolvency during the European Debt Crisis
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Bibliographic details
- Authors: Wolfgang Bergthaler, Jose M Garrido, Anjum Rosha
- Published: May 5, 2023
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400240928.001
Summary
- The European debt crisis in the early to mid 2010s brought to the fore the issue of household debt distress: in the countries affected, widespread over-indebtednes resulted in serious financial and social challenges.
- The crisis was primarily a mortgage debt crisis, but in several cases, the legal response was based on the introduction of personal insolvency procedures.
- The paper examines the challenges in designing and implementing legal reforms to promote a better understanding of the main considerations in resolving personal insolvency and distressed mortgage debt in the context of crises.
- Lessons from the European crisis may prove valuable when dealing with the aftermath of the COVID-19 pandemic and the war in Ukraine on household debt distress.
Key themes and analysis
- Focus: mortgage debt distress within broader household debt distress during the European debt crisis.
- Legal responses: analysis centers on the introduction and role of personal insolvency procedures as a policy tool in resolving mortgage-related household over-indebtedness.
- Implementation challenges: the paper addresses difficulties in designing and implementing legal reforms for personal insolvency and distressed mortgage debt in crisis contexts.
- Relevance: insights intended to inform policy responses to household debt distress following major shocks such as the COVID-19 pandemic and the war in Ukraine.
Findings and subject coverage
- Subject areas listed: Asset and liability management; Corporate insolvency; Debt settlement; Debt sustainability; External debt; Financial crises; Financial institutions; Financial sector policy and analysis; Mortgages; Solvency.
- Keywords provided: B. mortgage debt distress, consumer debt, consumer insolvency, Corporate insolvency, Debt settlement, Debt sustainability, Europe, household debt, household debt distress, mortgage debt, mortgage debt crisis, mortgage distress, Mortgages, Solvency.
Policy implications and recommendations (as framed by the paper)
- Evaluate the suitability of personal insolvency procedures as a response to mortgage-focused household debt crises.
- Design legal reforms mindful of implementation challenges in crisis environments.
- Apply lessons from the European debt crisis to prepare for post-crisis household debt distress arising from shocks like pandemics and wars.
Content in this bundle
- Working Paper