New Study Addresses “Bankruptcy Boom” Among Older Adults

There are many different reasons that older adults have to worry about their finances, from unexpected medical bills to bad investments. Many of those older adults end up struggling for years with a significant amount of consumer debt, unsure of how to make ends meet during retirement. For some, options such as a reverse mortgage might provide money to deal with high costs of living. For others, however, personal bankruptcy often becomes the best option. According to a recent article in The New York Times, we are beginning to see a “bankruptcy boom” among older adults. That information comes from a recent study conducted by the Consumer Bankruptcy Project.
What is leading more seniors to file for divorce, and what do these bankruptcy rates mean for consumers more generally?
Seniors Filing for Bankruptcy at Much Higher Rates
As the article explains, there are many different reasons that more seniors are filing for bankruptcy, and consumer advocates probably should have seen the “signs of potential trouble,” which include “vanishing pensions, soaring medical expenses, [and] inadequate savings.” In other words, costs are higher than ever for elderly Americans, and fewer of those Americans have saved enough money to account for such rising costs. In addition, the Consumer Bankruptcy Project study suggests that “a three-decade shift of financial risk from government and employers to individuals” has also added to the increased rates of bankruptcy among older consumers.
To put it another way, there are two different forces at work, according to the study, that are together resulting in higher consumer bankruptcy rates among seniors - higher costs for seniors who have saved less money, and more financial responsibility on those seniors “as the social safety net shrinks.” Americans are waiting longer to receive Social Security benefits, retirement benefits are providing less than they used to, and healthcare costs continue to increase. When older adults do not have enough income to live and to pay debts, most of them have few options.
According to Deborah Thorne, an author of the study who is an associate professor of sociology at the University of Idaho, older Americans often are not able to take financial hits as well as younger people and then bounce back, especially when those financial hits are unexpected.
Bankruptcy can Still Provide Benefits for Older Adults
Many seniors worry that filing for bankruptcy means that they will lose their retirement income, including Social Security benefits and income from 401(k) accounts or employer-provided pensions. While Thorne and the other authors of the study admit that bankruptcy cannot give elderly Americans the same “fresh start” that it can for younger people who can rebuild their financial profile, Chapter 7 bankruptcy can still provide benefits to seniors without stripping them of the income they do have.
Most retirement benefits are exempt in Chapter 7 bankruptcy proceedings, meaning that older Americans can maintain that income even though other assets may be liquidated. Currently, more than 12% of all bankruptcy filers are aged 65 and older. Compared to figures from 1991, just around 2% of bankruptcy filers were in that age group.
Learn More from an Oak Park Bankruptcy Lawyer
If you are retired but have questions about how bankruptcy might be able to help, you should speak with an Oak Park bankruptcy attorney about your situation. Contact the Emerson Law Firm for more information.
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