Bankruptcy filings by older Americans have increased rapidly over the past three decades. Seniors made up just 2% of total filings in 1991, but now account for 12% of all bankruptcies. A research paper by Indiana University says 133,000 out of 51 million people over 65 file for bankruptcy relief.
The study shows many of those filing are on the lower end of the income spectrum. For seniors who filed for bankruptcy in 2016, 78% had an income below the median average. Many of them co-signed student loans for children or grandchildren and couldn’t keep up with payments.
Reasons why senior bankruptcies are growing
According to Forbes magazine, there are many intertwined reasons why older Americans are in financial distress, including:
- Erosion of labor unions: During the past 40 years, union wages and pensions have decreased or stagnated. Many companies have replaced pensions with defined-benefit plans or 401(k) options.
- Medical costs: One of the biggest reasons for increased debt loads is massive medical expense. Rising costs have happened while Medicare pays for a smaller portion of treatment than in the past. People are living longer and accumulating more medical debt.
- Poor financial decisions: As a group, aging baby boomers are not as frugal as their Depression-era parents when managing their money. Many have accumulated massive debt from credit cards and loans.
- Predatory lending practices: Banks and other creditors offer low-interest credit cards to seniors, even if they have filed for bankruptcy. A Federal Reserve study found 60% of senior households had significant debt in 2016.
Consider all options when dealing with debt
While bankruptcy is an option many look to avoid, sometimes it can be the best way to deal with overwhelming debt. An experienced bankruptcy attorney here in South Carolina can help you separate fact from fiction over the process, and help you decide whether it may be the best way to regain your financial freedom.