Local Conditions and Debt in Collections

Breno Braga, Signe‐Mary Mckernan, Caroline Ratcliffe, Brett Theodos, John Chalekian and Christopher Trepel

Journal of Consumer Affairs, 2019, vol. 53, issue 4, 2058-2085

Abstract: Using credit reporting firm records on 7 million individuals in the United States, we first demonstrate that debt in collections varies significantly across the country; specifically, the South and West regions have higher shares of individuals with debt in collections than other regions. Second, we identify local factors that are strongly related to debt in collections. Results from our regression models show that neighborhoods with higher rates of debt in collections are more likely to have (1) lower health insurance coverage; (2) lower home values and homeownership rates, (3) a higher share of delinquent and underwater mortgages, (4) lower household incomes, and (5) a higher share of African Americans and Latinos. While our analysis does not identify the causal mechanisms that determine financial distress, the analyses developed here can facilitate research on such mechanisms.

Date: 2019
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