More Older Americans Are Filing Bankruptcy
ing to a study sponsored by the AAPR's Public Policy Institute called
Generations of Struggle, the "average age for filing bankruptcy has increased, and the rate of bankruptcy filings among those ages 65 or older has more than doubled since 1991."
This study was published in 2008 and admittedly a lot has happened with the economy since then, so it's somewhat dated. But from my own experience as an attorney who has met day after day with clients over the course of many years, I think that the trends revealed there have continued and likely accelerated.
This AARP study shows that people filing bankruptcy ages 55-84 made up 8.2 % of filers in 1991, but this age group shot up to 22.3 % of filers by 2007. Also, the bankruptcy filing rate—the number of people who file bankruptcy out of 1,000 people—for this group went up significantly in that period, from less than 2 per 1,000 people in that population to 3.5 per 1,000. That's an increase of about 75%, a huge increase.
Even more dramatically, the oldest people, those 75-84 years of age, made up only 1.8 % of filers in 1991, but increased to 5.0 % in 2007. And their bankruptcy filing rate climbed sharply from 0.3 per 1,000 to 1.6 per 1,000. That's an increase of more than 4 times as many older seniors filing bankruptcy than had earlier.
The study concludes, "the bankruptcy risk for older Americans has increased substantially."
Why Are More Seniors Considering Bankruptcy?
The reasons for this big increase are not clear. There are many plausible possibilities.
During the last couple decades the earning power of the middle class has been declining, so older folks now have comparatively little cushion for financial challenges like job loss or serious medical problems. Relatedly, the amount of retirement savings and the value of other accumulated assets have declined in relation to the cost of living, especially the cost of medical care.
One of the authors of the study referenced above, Elizabeth Warren, at the time a Harvard Law professor and now a U.S. Senator from Massachusetts, said: "In past generations, older Americans were more financially secure. Now, instead of going into retirement loaded with assets, Americans are hitting their retirement years loaded with debt."
The director of consumer and state affairs at the AARP Public Policy Institute, George Gaberlavage, which sponsored the study, cited the cost of health care as the single biggest cause of the rise in bankruptcy filings for older Americans. "Health care is a big issue for the elderly," he says. "And out-of-pocket [medical] expenses have been going up."
There also seems to be more parents and grandparents feeling compelled to give financial help to their adult children and grandchildren. This has seemed to be especially true during these last 5 years of economic upheaval and the extended very tough job market for younger people during this "jobless recovery." Whether funded out of their own assets or by their borrowing, it leaves seniors more vulnerable. Often this help is financed by the parents'/grandparents' credit card cash advances. Credit card companies do not hesitate to send card offers to retirees with only pension and social security income.
Lastly, seniors are more and more often entering their retirement years still owing student loans, their own or their children's, the former often incurred while trying to retrain themselves after their long-time jobs were permanently outsourced.
Special Issues for Older Californians
Regardless of the reasons why, more Californians 55 and older are now feeling greater economic stress, driving them to look into filing bankruptcy. If you are in this category, there are special legal and practical considerations that you need to be aware of. There is not much information available about this, so it will be the focus of some of my next few blogs. So please 1) see these future blogs by subscribing to this blog site (click on the "RSS FEED" link in the top right corner on this page), 2) visit this website often to see the new blogs, or 3) if you are in Southern California, call me for a free consultation about your own unique situation.