More Than A Third Of Americans Have Debt In Collections, Study Says (Map)

| by Jared Keever

More than a third of the country has delinquent debts that have been turned over to a collection agency, according to a report released Tuesday by the Urban Institute.

USA Today reports such debts have typically been left unpaid for 180 days. When that happens the account is closed and handed over to a collection agency. The type of debt treated this way can include credit card debt, hospital bills or even unpaid gym memberships. 

Having debt turned over to collections can damage credit scores and even harm job prospects, according to Caroline Ratcliffe, a senior fellow at the Washington-based think tank that prepared the report. 

“Roughly, every third person you pass on the street is going to have debt in collections,” Ratcliffe told The Associated Press. “It can tip employers’ hiring decisions, or whether or not you get that apartment.”

The study found that 35.1 percent of people with credit reports had been reported to a collection agency. The amount of debt reported averaged $5,178, according to September 2013 records.

The study indicates that even though Americans are carrying less credit card debt than they were prior to the Great Recession, the percentage of those people being reported for collections has remained constant.

Josh Bivens, a research and policy director at the Economic Policy Institute, said that is “pretty disheartening.”

“This is yet another really bad legacy of the Great Recession that we're just nowhere near climbing all the way out of,” he said.

Southern states stand out as those with the highest percentage of people with delinquent bills.

In 13 states across the South, more than 40 percent of the population has a debt in collections.

Nevada, one of the states hardest hit when the housing bubble burst, has over 46 percent of its population in collections.

Ratcliffe said that because incomes have remained stagnant during the meager economic recovery, many families are still struggling to repay their obligations.

Labor Department figures indicate wages have barely kept up with inflation over the last five years. 

Eric Salazar, a manager for the credit counseling agency GreenPath, said he sees people all the time who are struggling because of low wages.

“There is not the income growth to save and they have to make survival decisions,” he said. “You make the decision to pay for the roof over your head and to feed your family and that's all you can afford to do.

Here is a map illustrating the average debt in each state, courtesy of USA Today:

Sources: USA Today, Mercury News (AP Story)

Photo Source: USA TodayWikimedia