More than 35 percent of adult Americans have debt and unpaid bills that are reported to debt collectors, according to a study by nonprofit organization Urban Institute. The state of Nevada, which was hit hard by the housing crisis, reported the highest number of Americans faced with debt problems.
Some 47 percent of people in Nevada with a credit file have The state also has the highest average collections debt. Twelve other states (11 in the South) and the District of Columbia top 40 percent.
The study also showed that only about 20 percent of Americans with credit records have any debt at all. Yet high debt levels don not always lead to more delinquencies, since the debt largely comes from mortgages.
An average San Jose resident has $97,150 in total debt, with 84 percent of it tied to a mortgage. But because incomes and real estate values are higher in the technology hub, those residents are less likely to be delinquent.
By contrast, the average person in the Texas city of McAllen has only $23,546 in debt, yet more than half of the population has debt in collections, more than anywhere else in the United States.
Twelve other states (11 in the South) and the District of Columbia top 40 percent: Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, New Mexico, North Carolina, South Carolina, Texas, and West Virginia. On the low end, the Midwest's Minnesota, North Dakota, and South Dakota have about 20 percent of residents with reported debt in collections.
Debt in collections involves a nonmortgage bill-such as a credit card balance, child support obligation, medical or utility bill, parking ticket, or membership fee-that has been reported so far past due that the account has been closed and placed in collections, often with a third-party debt collection agency. This debt can remain in a person's credit file for seven years. Some consumers become aware of collections debt only when they review their credit report.
Of the 100 largest metropolitan areas, five have at least 45 percent of people with collections debt: McAllen, Texas (51.7 percent); Las Vegas, Nevada (49.2 percent); Lakeland, Florida (47.3 percent); Columbia, South Carolina (45.2 percent); and Jacksonville, Florida (45.0 percent).
Only six metro areas, none in the South, have less than a quarter of people with collections debt: Minneapolisâ??St. Paul, Minnesota (20.1 percent); Honolulu, Hawaii (21.0 percent); Boston, Massachusetts (22.4 percent); Madison, Wisconsin (22.6 percent); San Jose, California (23.0 percent); and Bridgeport, Connecticut (24.5 percent).
About 790 of the 72,000 census tracts studied have at least 75 percent of adults with collections debt. Fewer than 10 have no one with such debt. Census tracts average about 4,000 residents.
"Most people wouldn't blink if told that the majority of Americans carry some debt. But they would be shocked to learn that reported debt in collections is pervasive and threads through nearly all communities," said Caroline Ratcliffe, a senior fellow at the Urban Institute. "Delinquent debt can harm credit scores, which can tip employers' hiring decisions, restrict access to mortgages, and even increase insurance costs."
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