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More than a third of U.S. adults have debt in collections and their average debt in collections is $5,178, according to a study published today by the Urban Institute [ht: eo].*
Debt in collections involves a nonmortgage bill—such as a credit card balance, medical or utility bill—that is more than 180 days past due and has been placed in collections.
More than 1 in 20 people with a credit file have a report of past due debt, indicating they are between 30 and 180 days late on a nonmortgage payment. In other words, they have debt that has been reported as past due to the credit bureau. Among people with debt past due, the average amount they need to pay to become current on that debt is $2,258.
Compared with debt past due, a broader set of debts can enter collection status (e.g., medical bills, parking tickets, membership fees), and they can remain on a credit report for up to seven years. People with both types of delinquent debt (collections and past due) have higher average collections debt than those with only collections debt—$9,123 versus $4,641, respectively.
Both figures—the percentage of Americans with debt in collections and the percentage with past due debt—illustrate the enormous financial distress experienced today by a large number of poor and working-class Americans, which will likely haunt them and the communities in which they live for many years to come.
*The credit bureau data used in the study describe people with credit files and do not represent the roughly 22 million US adults (9 percent of the population) with no credit file at all. Because adults without a credit file are more likely to be financially disadvantaged, their data underrepresent low-income consumers. Their analyses also exclude debts such as loans from friends or family, or loans outside the financial mainstream, such as payday or pawnshop loans.