This paper presents a theory of debt based on the inalienability of human capital. The authors analyze how an entrepreneur's ability to withdraw his human capital from a project affects the optimal repayment path of debt. The key insight is that the possibility of repudiation (i.e., the entrepreneur quitting the project) imposes an upper bound on the total future indebtedness from the entrepreneur to the investor at any date. This constraint can lead to situations where some profitable projects are not financed. The paper considers an entrepreneur who needs to raise funds from an investor but cannot commit not to withdraw his human capital from the project. The possibility of default or quitting puts an upper bound on the total future indebtedness from the entrepreneur to the investor at any date. The authors characterize the optimal repayment path and show how it is affected both by the maturity structure of the project return stream and by the durability and specificity of the project assets. Their results are consistent with the conventional wisdom about what determines the maturity structure of (long-term) debt contracts. The paper also analyzes how the repayment path varies with the underlying parameters of the model. Among other things, it shows that debt repayments will be pushed into the future as the project's assets become more durable; as project returns are earned later; or as the project's assets become less replaceable. These results correspond to the advice practitioners often give: for example, "lend long if the loan is supported by durable collateral"; and "match assets with liabilities." The paper is organized as follows. It begins with an introduction, then presents the model, followed by the analysis of the repayment path, and concludes with a discussion of the implications of the model for actual debt contracts and suggestions for further research. The paper also includes a detailed analysis of the renegotiation process and the conditions under which the project will be undertaken. The authors show that the project will be undertaken if and only if there exist repayment paths that satisfy certain conditions. They also show that the repayment path is affected by the entrepreneur's and investor's discount rates and their ability to reinvest. The paper concludes with a discussion of the implications of the model for actual debt contracts and suggestions for further research.This paper presents a theory of debt based on the inalienability of human capital. The authors analyze how an entrepreneur's ability to withdraw his human capital from a project affects the optimal repayment path of debt. The key insight is that the possibility of repudiation (i.e., the entrepreneur quitting the project) imposes an upper bound on the total future indebtedness from the entrepreneur to the investor at any date. This constraint can lead to situations where some profitable projects are not financed. The paper considers an entrepreneur who needs to raise funds from an investor but cannot commit not to withdraw his human capital from the project. The possibility of default or quitting puts an upper bound on the total future indebtedness from the entrepreneur to the investor at any date. The authors characterize the optimal repayment path and show how it is affected both by the maturity structure of the project return stream and by the durability and specificity of the project assets. Their results are consistent with the conventional wisdom about what determines the maturity structure of (long-term) debt contracts. The paper also analyzes how the repayment path varies with the underlying parameters of the model. Among other things, it shows that debt repayments will be pushed into the future as the project's assets become more durable; as project returns are earned later; or as the project's assets become less replaceable. These results correspond to the advice practitioners often give: for example, "lend long if the loan is supported by durable collateral"; and "match assets with liabilities." The paper is organized as follows. It begins with an introduction, then presents the model, followed by the analysis of the repayment path, and concludes with a discussion of the implications of the model for actual debt contracts and suggestions for further research. The paper also includes a detailed analysis of the renegotiation process and the conditions under which the project will be undertaken. The authors show that the project will be undertaken if and only if there exist repayment paths that satisfy certain conditions. They also show that the repayment path is affected by the entrepreneur's and investor's discount rates and their ability to reinvest. The paper concludes with a discussion of the implications of the model for actual debt contracts and suggestions for further research.