Paper short abstract:

The notion of household over-indebtedness is questioned in the light of the current wave of home repossessions in Spain. Attention is paid to the strategies used by households, either in order to keep up with repayments, or in order to find support for their decision to quit repaying.

Paper long abstract:

Since the beginning of the current economic crisis, over-indebtedness due to mortgage borrowing has been threatening many Spanish households with home repossessions.

As a common sense assumption, indebtedness turns into over-indebtedness whenever certain quantitative criteria are met, and thus a normative statement emerges: mortgage repayments should not surpass a certain percentage of income. In the real world, however, this reasoning reveals its weakness when unpredictable circumstances affect household budgets. Calculations made by households during the housing bubble have turned to be wrong as unemployment, illness or divorce -the most conspicuous examples of such unexpected events- have entered the scene.

Moreover, as it will be our main contention, financial vulnerability in the face of indebtedness is not a simple function of the availability of income during the changing cycles of the economy. Rather, different levels of indebtedness are to be understood in combination with a differential access to resources -other than income- that may help households to cope with hardship.

First, resources aiming at keeping up with repayments may include informal monetary help and non-economic resources, such as information or useful social connections. But also, at a certain stage, debtors may benefit less from aid to keep up with repayments, than from the advice to give them up, a decision that implies challenging the moral obligation to repay debts (Graeber 2011).

In our view, the availability of this diversity of resources needs to be considered in order to understand the patterns of social inequality derived from mortgage over-indebtedness under finance capitalism.