Though the number of consumer bankruptcies has largely been declining overall throughout the last several years, there is one demographic for whom bankruptcy is actually becoming more and more common – and it’s a trend that is alarming many economic watchdogs and consumer protection experts.
A growing body of research has indicated that the number of older Americans filing for bankruptcy has skyrocketed in recent years. Much of this reporting comes from one prominent 2018 study, “Graying of U.S. Bankruptcy: Fallout from Life in a Risk Society.”
This report, which is available in full here, looked at bankruptcy trends and consumer data for more than two decades. Ultimately, researchers determined that bankruptcy is booming among older adults, and at a rate that population growth alone cannot explain.
The Rise in Bankruptcy Among Older Adults: Trends and Stats to Know
According to the Indiana Legal Studies research paper – which has been cited by sources including Ozy, Forbes, MarketWatch, and U.S. News & World Report – adults over 65 accounted for roughly 2 percent of bankruptcy filings in 1991. By 2016, seniors accounted for more than 12 percent of all bankruptcy filings.
As Ozy and the Financial Times note, that’s a nearly five-fold increase in just 25 years – and it suggests that, as of 2016, roughly one in seven people who filed for bankruptcy in the U.S. were 65 or older. According to U.S. News, the share of total bankruptcy filings climbed by nearly 1,000 percent for those 75 or older during the same 25-year period.
As Forbes points out, this data suggests that roughly “98,000 families or about 133,000 elders out of 51 million people over 65 file for bankruptcy to get relief from all debt.” What’s more, Forbes notes:
“in most cases, those filing for bankruptcy come from the lower end of the income ladder. Of elder households that filed for bankruptcy in 2016, 78% made less than median total income.”
As the research paper observes, during that same time period, the elderly grew as a percentage of the adult population – however, their share of the population increased only from 17 percent to 19.3 percent. That relatively modest growth in population is not enough to justify such a dramatic leap in bankruptcy filings. That suggests that there are other conditions influencing the number of older adults filing for bankruptcy – some apparent, and some less immediately visible.
Why Is Bankruptcy Becoming More Common Among Seniors?
So, what’s behind the increasing number of older adults pursuing bankruptcy? Many consumer protection experts believe that the finger can be pointed at a few different factors, including the rising costs of medical care, increasing amounts of debt among seniors, and a widespread decline in pensions and sources of retirement income.
When it comes to health care costs? According to an article brought to our attention by MarketWatch, out-of-pocket health care costs for elderly Americans who use Medicare “consumed up to 41 percent of the average social security income in 2013,” and this metric is expected to climb to 50 percent by 2030, per research from the Kaiser Family Foundation. Meanwhile, the financial services company Fidelity Investments projected that the average American couple would need $280,000 to cover health care and medical expenses throughout retirement, as of 2018; as MarketWatch points out, that’s a 75 percent increase since 2002, when the company’s estimate sat at $160,000.
As health care costs grow ever higher, research also suggests that older Americans are being saddled with more debt than ever before. For instance? As Ozy notes, citing a U.S. Federal Reserve survey, roughly one in five Americans 75 or older were in debt as of 1989; by 2016, that amount had risen to almost half of the population.
According to data cited by the Chicago Tribune,only 22 percent of 65 year-olds had mortgage debt as of 1995; by 2018, 38 percent did. At the same time, the average mortgage debt in 1995 was $27,300 – and had climbed to $73,000 as of 2018, per the Tribune. Figures from Debt.org suggest that the number of senior citizens with student loan debt “has quadrupled over the last decade.”
As the authors of the “Graying in U.S. Bankruptcy” report explain:
“With few exceptions, the road to bankruptcy is long… Combined, more than six out of ten older debtors struggled for at least two years to repay their debts before they turned to bankruptcy for help.”
Finally, as the authors of the study note, older Americans are facing the challenge of “reduced income,” due in part to what they call a “shrinking” in the social safety net. Pensions are becoming less common (and less reliable), more adults are relying on fluctuating 401(k)-style savings programs, and many older adults are forced to tap into social security early, which can come with heavy penalties.
Bankruptcy Is About More Than Just the Numbers
For older adults, considering bankruptcy can be a daunting process, and there are bound to be countless questions that come up. There are many unique considerations that older adults and retirees must consider when it comes to bankruptcy, including how this process may impact their home, their retirement accounts, their social security payments, and their lifestyle goals.
For retirees in Chicagoland and beyond, the best way to determine if you qualify for bankruptcy, and what strategies to pursue in bankruptcy, may be to consult with an experienced legal professional.
With a bankruptcy attorney on your side, there is no need to search for all the variables and hope you don’t miss any key detail, or waste your time seeking out costly and ineffective third party remedies. Instead, an attorney can help you pursue the right course of action for your unique financial situation. Legal professionals can also offer the force of law to protect you from creditors, all while being held to a higher standard by the state and ethics review boards.
If you’re looking to get a better understanding of bankruptcy, do not hesitate to get in touch with the Gunderson Law Firm. We can get you actual, straightforward answers for your personal situation, and your first consultation with us costs you nothing.
At the Gunderson Law Firm, we strive to protect our clients’ assets to the full extent allowed by today’s laws throughout the complex bankruptcy process, helping them get the debt relief they not only need, but genuinely deserve. For retirees and seniors, we can address your specific situation with strategic plans to help put severe indebtedness behind you so you can enjoy life again. Drop us a line whenever you’d like to keep the discussion going.
