More Older Americans Are in Financial Distress
According 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.”
Although this study was published in 2007 and so is somewhat dated, from our own anecdotal experience as attorneys who have met day after day with clients over the course of many years, we believe the trends revealed there have continued and probably accelerated.
The study shows that people filing bankruptcy ages 55-84 comprised 8.2 percent of filers in 1991, but 22.3 percent of filers in 2007. The bankruptcy filing rate of this group went up significantly from less than 2 per thousand people in that population to 3.5 per thousand.
More dramatically, the oldest people, those ages 75-84, comprised only 1.8 of filers in 1991, but 5.0 percent in 2007. And their bankruptcy filing rate shot up from 0.3 per thousand to 1.6 per thousand. That’s an increase of more than 4 times as many older seniors filing bankruptcy.
As the study concludes, “the bankruptcy risk for older Americans has increased substantially.”
Why Are More Seniors Needing to Consider Bankruptcy?
All kinds of reasons are given for this big increase.
During the last couple decades as wealth has been slipping out of the middle class, older folks now have comparatively little cushion to deal with the financial challenges like job loss and medical problems. The amount of retirement savings and the value of other accumulated assets has declined compared to the cost of living, especially the cost of medical care.
One of the authors of the study referenced above, Elizabeth Warren, who was a Harvard Law professor at the time and is now a U.S. Senator, 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.”
According to George Gaberlavage, director of consumer and state affairs at the AARP Public Policy Institute which sponsored the study, the cost of health care is the single biggest cause of the rise in bankruptcy filings among those of retirement years. “Health care is a big issue for the elderly,” he says. “And out-of-pocket [medical] expenses have been going up.”
We also see first-hand the bad financial consequences of parents and grandparents helping their adult children and grandchildren, especially during these last 5 years of economic upheaval and a very tough job market for the younger generation. Unfortunately, the source of that help is often the parents’/grandparents’ credit card cash advances. Credit card companies have had no problem sending cards to retirees with only pension and social security income. Or the parents/grandparents co-sign loans that the younger folks end up not paying.
Finally, more and more seniors are entering retirement years still owing student loans, often incurred while attempting to retrain themselves when their jobs permanently disappeared because of outsourcing and globalization.
Special Issues for Older Americans
Regardless why, more people over 55 are now feeling greater economic stresses. And the reality is that if you are in this category there are special legal and practical considerations when it comes to bankruptcy and other potential solutions to your financial challenges. We have seen very little attention paid to this, so we will focus our next few blogs on some of the most important of these considerations. So please visit our website often to see the new blogs, or if you are in the Portland greater metropolitan area call us for a free consultation about your own unique situation.