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We analyze a model of unsecured consumer loans. We characterize equilibrium behavior within the confines of U.S. bankruptcy law. Credit suppliers take deposits from households and offer loans via a menu of credit levels and interest rates in a competitive industry with free entry and zero costs. Borrowers have the option to default on their loans but are punished with a version of Chapter 7 U.S. bankruptcy rules. In our model it is poor people that want to default, and indeed they do so often.doi:10.2139/ssrn.314702 fatcat:7ju5dnawx5dnjncxqzkw3bdtkq