Nearly one third of Americans are delinquent on debt, according to a new report out from the Urban Institute. An analysis of the credit files of nearly 7 million Americans revealed that 35 percent had a debt so far past due it had been referred to a collection agency.
Generally speaking, for a debt to go to collections, it must first stand unpaid for at least 180 days and has likely been reported as negative information to one of the credit reporting bureaus.
The study further found that, on average, those with debts in collection owe a little over $5,000. Southern states are particularly affected by delinquent rates—with 10 reporting delinquent debt rates at or over 40 percent, reports USA Today.
The abundance of bad debts is a lasting testament to the financial crisis and ruined credit it left in its wake—Nevada, one of the states hardest hit by the bursting of the mortgage bubble, continues to report debt delinquency rates north of 45 percent.
However, while the Economic Policy Institute’s Josh Bevins notes the results are “pretty disheartening” he did add there were some important factors to bear in mind.
One of which is that many Americans have bad debt as a result of ignorance, not actually lack of ability or willingness to pay. These sorts of debts are medical in nature, consumers do not know an insurance company hasn’t picked something up, and so the debt slides into collections.
“The numbers don’t necessarily speak to the percentage of households that haven’t been paying their obligations,” he says of the data.
The data does lack for some types of information however, payday loans and other products for the underbanked were not counted into information.
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