1 in 3 Americans (with credit history) in debt collections

[Engineer]

http://money.cnn.com/2014/07/29/pf/debt-collections/index.html?iid=HP_LN&hpt=hp_t2

An estimated 1 in 3 adults with a credit history -- or 77 million people -- are so far behind on some of their debt payments that their account has been put "in collections."

That's a key finding from a new Urban Institute study.

It examined non-mortgage debt, including credit card bills, car loans, medical bills, child support payments and even parking tickets.

The debt in collections ranged from as little as $25 to a whopping $125,000. But the average amount owed was $5,200.

Of course, my take is that debt was used to supplement falling wages as jobs left this country. Once the credit card was cut off and a large recession hit, bam....there goes the neighborhood.

I admit that I'm surprised that the number is this high. I suspect that many with with smaller amounts ($25?) don't even know that they are in collections though. I've heard from people who have small debts that they don't know about that slipped through the cracks (wrong mailing address, etc) and ended up in collections.

 

[SandEagle]

reminds me that i need to buy that 60" LCD i had my eyes on lately

 

[Engineer]

reminds me that i need to buy that 60" LCD i had my eyes on lately

You need to go into debt to buy a 60" LCD at today's prices? :hmm:

Must not be part of the normal AT crowd then.

 

[MustISO]

Seems really high. Maybe the people I know don't have this issue or don't admit it. I've never known anyone who was in debt collection of any kind.

 

[MongGrel]

You need to into debt to buy a 60" LCD at today's prices? :hmm:

Must not be part of the normal AT crowd then.

:biggrin:

()

 

[Engineer]

Seems really high. Maybe the people I know don't have this issue or don't admit it. I've never known anyone who was in debt collection of any kind.

I've known about 20 people in collections that I can recall just off the top of my head including many in my family. Even at the small shop that I work at, there have been at least 3 people (out of 15 or so over the last 4 years) that have been in collections (and that's just the ones that I know of).

 

[Matthiasa]

There is a lot things that can put one into collections such as a store or company breaking contract but still demanding payment, company payment systems going down (or not functioning correctly) with no notification, other dishonest dealings, etc.

Due to standard corporate practice I am somewhat surprised it's not higher.

 

[OILFIELDTRASH]

Accumulating debt and writing it off is another form of income to many these days. These people in collections likely had zero intention of paying off the debt to begin with. I'm really not mad at them as wall street looted the tax payers when the mortgage fiasco came back to bite them in the ass and they didn't want to pay their debt.

 

[brandonb]

As someone who works in the industry. 100 million people in collections. Yeah, probably.

But its much harder to charge off on the collections these days, because the IRS will be notified and you will have to pay taxes on it as income. They changed this a few years back. We are actually struggling to find accounts/debt to collect on these days, its becoming harder and revenue is dropping. It was at record levels 3 years ago but its changed over the last few years.

 

[IronWing]

There is a lot things that can put one into collections such as a store or company breaking contract but still demanding payment, company payment systems going down (or not functioning correctly) with no notification, other dishonest dealings, etc.

Due to standard corporate practice I am somewhat surprised it's not higher.

This. Companies are using debt collection as a method of extortion.

 

[highland145]

As someone who works in the industry. 100 million people in collections. Yeah, probably.

But its much harder to charge off on the collections these days, because the IRS will be notified and you will have to pay taxes on it as income. They changed this a few years back. We are actually struggling to find accounts/debt to collect on these days, its becoming harder and revenue is dropping. It was at record levels 3 years ago but its changed over the last few years.

I report my 1099-c but I thought that was to keep me (the lender) honest and the IRS didn't pursue them. I was looking into it when I heard someone got a 1099-c from the mortgage company after a foreclosure. Don't remember the $$ but it was an astronomical amount...$100K ish.

 

[DrDoug]

This article has a great visual on the numbers of people in collections throughout the country. While a few northern states have some high concentration areas it looks like the south is slammed with the number of people in collections.

Damn, I thought the majority of fiscal conservatives in this country were in the south...lol!

 

[joutlaw]

This article has a great visual on the numbers of people in collections throughout the country. While a few northern states have some high concentration areas it looks like the south is slammed with the number of people in collections.

Damn, I thought the majority of fiscal conservatives in this country were in the south...lol!

You must have forgot about all the people in poverty with no idea how to manage the little money they have.

 

[Engineer]

You must have forgot about all the people in poverty with no idea how to manage the little money they have.

Not very conservative when it comes to money.

 

[fskimospy]

I would love to see the median amount owed.

Edit: it's easy for a number like this to be misleading. If you're in collections for $20 that's probably because you dispute the bill or simply don't care. If you're in collections for many hundreds or thousands, that's a real problem.

 

[AyashiKaibutsu]

Not very conservative when it comes to money.

Voting Republican is all about being convinced to vote against your own interests if you're poor.

 

[werepossum]

I report my 1099-c but I thought that was to keep me (the lender) honest and the IRS didn't pursue them. I was looking into it when I heard someone got a 1099-c from the mortgage company after a foreclosure. Don't remember the $$ but it was an astronomical amount...$100K ish.

Lot of people get really surprised about this when their bank forgives the outstanding balance on a short sale, then they find out that the IRS takes a rather more hard-nosed approach.

Given the huge numbers I'd bet that most of this is either quite small disputed debts as Eskimospy suggests, like automatic magazine renewals, or medical debt and student loans. Tons of disputed or otherwise noncollectable debt is sold for pennies on the dollar to collection agencies. People without health insurance can easily get over their head with no clear path to pay off their debt, ever. And so many people either rack up far more student loan debt than their degrees can support or simply don't feel they should have to pay them off. Either way I'd want to see more data before necessarily accepting this.

 

[highland145]

Lot of people get really surprised about this when their bank forgives the outstanding balance on a short sale, then they find out that the IRS takes a rather more hard-nosed approach.

This is want I want to know. The little that I looked into it looked like the IRS didn't go after 1099-Cs.

Given the huge numbers I'd bet that most of this is either quite small disputed debts as Eskimospy suggests, like automatic magazine renewals, or medical debt and student loans. Tons of disputed or otherwise noncollectable debt is sold for pennies on the dollar to collection agencies. People without health insurance can easily get over their head with no clear path to pay off their debt, ever. And so many people either rack up far more student loan debt than their degrees can support or simply don't feel they should have to pay them off. Either way I'd want to see more data before necessarily accepting this.

+1

 

[highland145]

Voting Republican is all about being convinced to vote against your own interests if you're poor.

Hey, let's legalize 20M peeps that will take your minimum wage job and actually do it.

Too bad the welfare and EITC won' be cut.

 

[werepossum]

This is want I want to know. The little that I looked into it looked like the IRS didn't go after 1099-Cs.
+1

In theory, if you get a 1099-C that must be reported as taxable income and the IRS will correlate it with your filed return. In practice, the IRS has never managed to create a workable central file system (evidently being too preoccupied with more important matters such as making sure only Democrats can donate tax free money for political ads) so I'm sure it seldom works as designed. However, the only people that I know who did short sales were indeed hit with income tax on that money - and were uniformly and loudly pissed about it. My ex-neighbor was one. She got divorced, refinanced to pull out all the equity, immediately got a second mortgage, and then refused to pay either. After about two years the primary note holder notified her it was starting foreclosure in 60 days and she put it on the market, negotiating a short sale with the bank. She got a 1099-C and was contacted by the IRS before filing her taxes. I don't know about the second mortgage; although they were constantly hassling her and threatening bankruptcy they were behind her primary mortgage holder and the first mortgage was upside-down, so they may well have sold the paper to a collection agency rather than filing a 1099-C. They would at least get a few cents on the dollar and could still write off the rest without giving her the satisfaction of not having it over her head.

The irony of this is that her refi and second mortgage were late 2008/early 2009 time frame. The bank did later try to get her to refi using an Obama program which would have put the taxpayer on the line for the bank's losses. But her sister-in-law is a Realtor and explained to her how that would work. Right then the primary mortgage holder was owed more than the house would possibly bring and stood to eat the difference (or try getting it out of her) if it popped the house, but if she refinanced using the guaranteed loan program then the bank could pop the house after a set number of months, sell it quickly to regain most of their money, then file to have the taxpayers pick up most of the difference.

 

[Engineer]

Hey, let's legalize 20M peeps that will take your minimum wage job and actually do it.

Too bad the welfare and EITC won' be cut.

Hell, some of the GOP (including Ryan) want to expand it.

 

[highland145]

In theory, if you get a 1099-C that must be reported as taxable income and the IRS will correlate it with your filed return. In practice, the IRS has never managed to create a workable central file system (evidently being too preoccupied with more important matters such as making sure only Democrats can donate tax free money for political ads) so I'm sure it seldom works as designed. However, the only people that I know who did short sales were indeed hit with income tax on that money - and were uniformly and loudly pissed about it.

That's what I'm looking for. I file all 1099-Cs (charge offs $600+) and I want the IRS to garnish something...maybe EITC... with penalties because it's been several years before the IRS bothered to look.

I'm seeing a decent revenue stream here.

 

[highland145]

Hell, some of the GOP (including Ryan) want to expand it.

Maybe Cantor will be the norm. The people that are going to have their jobs taken by legalization "might" wake up.

But I think C was the results of people crossing party lines.

We're effed.

 

[Newell Steamer]

including credit card bills

I would be interesting to see what is on those credit card bills;
- TVs?
- iPhones?
- tattoos?
- online Canadian Pharmaceutical website purchases? ,... gotta get my oxy on,...

In all seriousness, if indeed that credit card debt is made up of electronics, restaurant meals, and shopping at Macys - then these people are certainly living beyond their means.

If the credit card debt was used to pay for super market purchases, doctor visits and other necessary spend - then it is a lack of jobs / well paying jobs.

Now, any other type of debt, you have to assume it slid into debt, because the money was spent someplace else of course. But, only defective alarmist conservatives automatically assume the money was spent on stupid shit. So, insight into the credit card data would shut up a whole lot of loud mouths; it would be nice to see the details and finally settle this drive to vilify people who are in distress.

 

[Zorkorist]

Hi Engineer,

I have a cheap bridge I will sell you. Give me $5,000 and it is yours.

-John