Geographically Speaking: Debt Collection Rates By State

They say that you are the average of the five people that you spend the most time with. They also say that attempting to keep up with “The Joneses” is a sure way to end up in the poor house.

A recent study into debt collection by The Urban Institute has found that both of these concepts have some merit in the world of debt collection as well. By looking at the percentage of residents with outstanding debts in collection, they were able to identify clear geographic trends that support the idea that debt collections are far more prevalent in some areas of the country than they are in others.

Highest Debt Collection Rates

According to the information published in the study, the 10 states with the highest percentage of residents who have outstanding debts in collections are Nevada, South Carolina, Mississippi, Texas, Louisiana, Georgia, Washington D.C., Florida, Alabama, and West Virginia. You don’t need any advanced analysis here to be able to see that most of the states on this side of the collections spectrum are located in the Southeastern part of the country.

The numbers show that 43.5% of Nevada residents are struggling with outstanding collection, having an average of almost $3,000 in outstanding debt. Even West Virginia, with the 10th highest collection rate, still has 37.6% of its residents dealing with collections.

Lowest Debt Collection Rates

On the flip side, the 10 states with the lowest percentage of residents who have outstanding debts in collections are North Dakota, Minnesota, Hawaii, Massachusetts, South Dakota, Nebraska, Montana, Iowa, Connecticut, and Wisconsin. Clearly, there is a trend toward the Midwestern states in this group, and a few from the New England region as well.

The state with the fewest percentage of residents facing collections is North Dakota, where only 17.1% of residents have collection and the average amount outstanding is only $901. Even Wisconsin at number ten on the list isn’t bad, with 24.6% of residents facing collections with an average amount of $1,278.

Other Correlations

One of the most interesting aspects of the study, beyond the hard numbers, was the concept that there were other numbers like health insurance coverage rates and home ownership rates that directly correlated with the debt collection rates.

People in those high debt southern states were less likely to have health insurance or own their own homes, while people in the lower debt states up north were far more likely to have health insurance coverage and to own their own homes.

This shows that outstanding debt is not an isolated occurrence. It falls right in line with many other important financial issues, often compounding them.

Using This Information to Your Advantage

So how do we take this information and use it to our advantage?

If you are in a business that extends credit to customers on a national scale, you should definitely put some stock into where those customers are located. Individual qualifications will always trump geographic concerns, but this proves that those geographic concerns definitely deserve some merit.

If you are on the consumer side and want to avoid dealing with debt collection issues down the road, surrounding yourself with people who aren’t in debt is the best way to help yourself. It will be much easier to do that in one of the lower debt states than it will be in one of the higher debt states.

No matter whether you are a debtor or creditor, surrounding yourself with people who limit their debts is always a good thing. If you are able to do this by adjusting your geographic focus, this study is a great road map for that approach.

By | 2017-02-12T14:41:01+00:00 August 22nd, 2016|Press|0 Comments

About the Author:

Graduated from University of Utah - business degree 1990. Served in US Army as an interrogator / linguist, then as a tactical intelligence officer - Military Intelligence 1986-1990. Managed Western US sales operations for NY based collection agency 1990-1992. Founded Direct Recovery Associates, Inc. 1992-present