Who Takes Up Debt Relief? Evidence from a Voluntary Restructuring Program

We study participation in a large, voluntary consumer debt restructuring program implemented in Uruguay. Exploiting the program’s staged design, we distinguish borrowers’ engagement with the program (inquiry) from their acceptance of standardized restructuring terms. We develop a simple model in which borrowers differ in effort costs and in the value they attach to restoring a clean credit record, yielding clear comparative statics for participation and its heterogeneity. Using administrative loan-level data, we find that take-up increases with the amount of debt relief but declines sharply with age and varies systematically with proxies for effort costs. These results shed light on the mechanisms driving voluntary debt resolution and provide guidance for the design of effective debt-relief programs.