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Sara Foss's Thinking It Through
by Sara Foss

Thinking It Through

A Daily Gazette life blog
Her column and blog rolled into one

Personal debt not a new problem

When I first saw the figures contained in a recent report on America, I was alarmed.

The number of Americans not paying bills seemed high.

Thirty-five percent of Americans with credit reports have debt in collections, according to the study from the Washington, D.C.-based Urban Institute. The report estimates 77 million Americans owe an average of $5,200 in overdue debts, which includes credit cards, medical bills, utility bills and sometimes even parking tickets.

The Empire State fares a little better than average. Just over 28 percent of New Yorkers owe an average of $5,147 in overdue debts. In the Capital Region, 27.2 percent of the population owes an average of $5,288.

That isn’t great, but it is certainly better than states where delinquency is most common. In Nevada, nearly 47 percent of residents owe an average of $7,198 in overdue debts.

That said, I don’t see any reason to celebrate. Delinquent debt is never a good thing, and nearly one-third of New Yorkers are dealing with the problem in one form or another.

This suggests many of the state’s residents have financial troubles that cannot be fixed quickly and increases the likelihood they’ll be harassed by a debt collector. While most debt collectors follow the law, some employ unscrupulous and illegal tactics to try to scare people into paying their debts, such as making threats and lying.

What does it mean to have debt in collections? It means a bill or bills has gone unpaid for so long that creditors are taking legal action or have turned the problem over to a debt collection agency. For a fee, debt collection agencies pursue overdue payments on behalf of the person or institution to whom money is owed.

Interested in learning more about delinquent debt, I read a bit deeper and became slightly less alarmed.

For one thing, the percentage of Americans has remained relatively flat over the past decade. In 2004, a Federal Reserve analysis of credit bureau data found that 36.5 percent of people in the U.S. had debt in collections.

So while it might be easy to blame the recession and the slow recovery for America’s high level of debt, the data reveals the problem predates the country’s recent economic woes. This suggests many Americans were under financial duress prior to the collapse of the housing bubble, which is worrisome, but I take a certain amount of comfort in the fact that the nation’s debt problem isn’t getting any worse.

This doesn’t mean I think a delinquent debt rate of 35 percent is acceptable. But I don’t think it’s something to panic about, either.

If there’s one thing I took away from the report, it’s that delinquent debt has been with us for a while, and it isn’t going anywhere any time soon.

In an article on the Urban Institute report featured in the Christian Science Monitor, Greg McBride, chief analyst for, suggested there’s more to the story of debt in America than the study suggested. He said many Americans might have items in collection they do not know about, such as an outstanding medical bill they thought their insurance company had already paid off. And sometimes people have errors on their credit reports.

People who accumulate debt are often irresponsible. They spend beyond their means and should repay what they owe. But there are many people who fall into debt for more sympathetic reasons.
Perhaps they were hit by an unexpected expense, such as hospitalization for a sudden illness. Or maybe they lost their job, or saw it become harder to keep up with rising expenses after years without a pay increase.

Whatever the case, indebtedness is usually a symptom of a larger problem. And the people who are struggling with it will probably be struggling with it for a long time.

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