In Honor of Cinco de Mayo – A Look at How Debt Affects Latino Consumers in North Carolina

In case you didn't know, Cinco de Mayo is a celebration that's largely limited to the US and isn't traditionally celebrated in Central or South America except in the state of Puebla in Mexico where it commemorates the Mexican Army's victory over the French in 1862. The American version of the fifth of May recognition traces its roots back to the 1860s when Mexican-Americans in California began the celebration. By the 1980s, the holiday had spread across the US and you likely see signage and ads for parties and special events near you.

Today, in honor of Cinco de Mayo, we'll take a look at how debt impacts the Latino population and what type of debt you're dealing with if this is you. Roughly 9% of the population of North Carolina considers themselves Hispanic or Latino and this population is growing. US Census data indicates that if you are in this demographic, you are likely accumulating debt in unique ways and avoiding other types of debt. And different factors drive those in the Latino population to bankruptcy than in other groups. 

Census Bureau data further indicates that Latinos have the second lowest net worth among minorities in America, African Americans being in the lowest tier. According to the Census Bureau, the main differentiator is less home ownership among Latinos, but lower stock and bond ownership is also a factor. Mayra Rodriguez Valladares with MRV Associates says that among Latinos, “there's not a lot of trust in the banking system and investments.”

And although the lower net worth is problematic, the good news is that if you are in this group, you are also accumulating less debt on average than other demographics. For instance, research by the group Demos showed that over the decade studied, credit card debt among Latinos increased by 20% while Caucasian households saw almost double this with an increase of 41%. White households with credit card debt spend an average of 24% of their income to service this debt while Latinos spent just 19%.

20% of Caucasian households with credit card debt and earnings of less than $50,000 had debt hardship. In Latino households, those in debt hardship was a much more reasonable 14%. Although these percentages don't look so bad, digging deeper into other research on minorities and credit by the NAACP, we found that 79% of Latino households carry credit card debt compared to 54% in white households. And to aggravate this, Latino consumers pay higher interest rates, on average, than Caucasian consumers.

But for Latino consumers that are considering bankruptcy, credit card debt is not the driving factor – medical bills are the major cause. Latinos in the US are more likely than any other racial demographic to be without health insurance (although the Affordable Care Act may alleviate this to some extent). As of 2012, less than half of Latino consumers had health coverage. NerdWallet Health estimated that 25% of Latinos under retirement age struggled with medical bills last year.

Christina LaMontagne, VP of Health at NerdWallet, says, “For 28 million permanently or temporarily uninsured Latinos, every visit to the doctor or hospital can be a very expensive and anxiety-inducing proposition.” Lack of health insurance can lead to high medical bills and financial difficulties that can ultimately be resolved only through bankruptcy.

Overall, though, the Latino population is the least likely demographic to file bankruptcy, period. Across America, Latinos make up 16.3% of the population - as of the most recent census - while they represent just 8.68% of those that file bankruptcy. And that's something to be proud of and one more thing to celebrate when we celebrate Latino culture next week on Cinco de Mayo.

If you are saddled with more credit card debt, medical bills and other obligations that you cannot afford to pay, contact the law offices of John T Orcutt for a free consultation to find out if bankruptcy is a viable option to diminish your debt and get a financial clean slate.