Seniors, Bankruptcy, and the Lingering Effects of the Financial Crisis

When we talk about the financial crisis and the bursting of the housing bubble, we often discuss it in the past tense—as something that occurred about a decade ago and is now over. However, many consumers in Oak Park, Illinois and across the country continue to struggle with debt, and many are still dealing with the lingering effects of the financial crisis. According to a recent article in Marketplace, seniors are having particular difficulty recovering from the economic collapse. Some are filing for personal bankruptcy, while others are attempting to live off of limited incomes while still making payments on debt.
What debt relief options are available to older adults, and are those debt relief options different from those available to younger people?
Lost Money in Retirement Accounts
There are many reasons that seniors are struggling with their finances in the decade after the economic collapse, including those who saved significant amounts of money in retirement accounts. As the article explains, some seniors who are in their late 60s and early 70s had long and lucrative careers, and many of them put a substantial percentage of their incomes into retirement accounts. Yet there was not enough time between the recession and the age of retirement for those accounts to bounce back from the significant hits.
To be sure, one 67-year-old senior profiled in the article explains that she earned an MBA from Harvard University and had “a long career in financial services” that allowed her to “save about a million dollars in a retirement account.” Based on her retirement account in the early 2000s, she expected to have a “comfortable retirement.” As she explained: “I did all the rights things. I saved my money. I didn’t waste it on . . . a big house or a big car or whatever.” However, the financial crisis resulted in a loss of more than 35% of her retirement money. To put that number another way, the financial crisis resulted in a loss of almost $400,000. As a result of that loss—and so close to the age of retirement—this particular senior now lives on a fixed income of $2,500 a month and lives in a tiny high-rise apartment for older adults.
In brief, for so many seniors who were nearing retirement age at the time of the financial crisis, there was not enough time to recover the money they lost.
Filing for Bankruptcy During Retirement
Those who are able to make ends meet on a fixed income, even if it is significantly less than what they had anticipated having during retirement, appear lucky compared to those seniors who are struggling with debt. The article underscores that, since 2007, the rate of bankruptcy among seniors has “nearly doubled,” and one of the causes is the remaining effects of the financial crisis.
Yet filing for bankruptcy during retirement has different effects than filing for bankruptcy while there is still time to continue working and getting your finances back on track. For most seniors, bankruptcy does not provide the same fresh start that it does for younger people since there is no longer a possibility of building back up a strong financial profile. Yet bankruptcy can still help seniors get out from underneath crushing debt.
Learn More from an Oak Park Bankruptcy Lawyer
If you have questions about debt relief for older adults, an experienced Oak Park bankruptcy attorney can help. Contact the Emerson Law Firm to learn more.
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