All About Our Unpaid Debts

One in Three Americans with a Credit File Has Debt Reported in Collections

All About Our Unpaid Debts
October 8, 2014

Not only are Americans awash in debt, but also a surprising amount of it is past due – with much of that having been sent to collections.

According to a recent study by the Urban Institute, 77 million people have a non-mortgage debt payment in collections. That is approximately one in every three adults in America. The types of debt range from credit card bills to parking tickets, and range in dollar value from $25 to $125,000, with an average of $5,200.

The study uses 2013 data from the credit bureau TransUnion to assess both the debt that is past due (at least 30 days late) and the debt that has been transferred to collections. Across the entire U.S., 35.1% of those with a credit file have a debt in collections, and 5.3% have past due debt that has not yet been turned over to collections.

The problem is likely even worse because this study only represents people with credit files. Approximately 22 million adults in the U.S. have no credit files, and a significant percentage of them may have past due debt and debt in collections.

Geographically, all sub-regions of the South lead the way in the total number of debtors in collections –ranging from 39.8% in the South Atlantic region (the eastern seaboard from Florida to Delaware including West Virginia) to a whopping 43.6% in the West South Central Region (Arkansas, Texas, Louisiana, and Oklahoma). The West South Central region also leads in past due debt with 7.5%. Meanwhile, the lowest number of debtors in collections may be found in New England (25.3%).

Nevada was hit incredibly hard by the housing bubble and subsequent recession, and the debt values show it. Las Vegas had just under half of its adults with debt in collections, helping Nevada to win the statewide prizes for the largest percentage of debtors in collections (47%) and largest average amount of debt in collections ($7,198). On the other end of the scale, North Dakota had the lowest number of debtors in collections with 19%, and the D.C. area had the smallest amount of average debt at $3,547.

Las Vegas only comes in second for metropolitan areas with high numbers of debtors in collections – McAllen, TX tops the list at 51.7%. The Minneapolis-St. Paul region comes in lowest at 20.1%.

While the South has the largest number of people with debt in collections, the average debt throughout the region is not particularly large. The West leads that category considerably, with the Mountain area first at $6,171 average debt in collections and the Pacific Region second with $5,517. There are fewer delinquent debtors in the West, but those who are debtors tend to hold a greater amount of unpaid debt.

Surprisingly, the study finds a relatively weak correlation between income levels and amount of unpaid debt.

While the Las Vegas area is the only area where the report lists housing as a factor, it makes sense that housing may be why income does not correlate more strongly. Overextending on a home purchase cuts across classes, and if you have to devote too much of your income to your home, you are likely to let some debts slide.

In any case, the study is an eye-opener with respect to debt in America. We hope that in the future people will take steps to pay off their debts in a timely fashion – and more importantly, not overspend and acquire more debt than they can afford to repay.

If you want to settle outstanding debts for less than what you owe, try our debt settlement tool.

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