8 Reasons Seniors File Bankruptcy

More seniors than ever are filing bankruptcy

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New research from the Consumer Bankruptcy Project recently reported that older Americans (aged 65 and above) are increasingly filing bankruptcy. The research used bankruptcy cases and questionnaires completed by 895 respondents between the ages of 19 to 92. They found a 204% increase in the number of seniors who file bankruptcy.

The data on senior bankruptcy

Consumer Bankruptcy Project data from the report “Graying of U.S. Bankruptcy: Fallout from Life in a Risk Society” is disturbing. It showed that 12.1% of all bankruptcy filers are older Americans, compared to just 2.1% in 1991. It indicates a problem with increasing financial distress among seniors and a potential threat to aging in America.

The study shows statistics that an increasing segment of households headed by those aged 60 or older carry debt. It’s currently 60% compared to 50% in 2001. With more debt and a declining and eventually fixed income for most, it’s no surprise bankruptcy is a solution more seek.

Here are eight reasons why seniors may be looking to bankruptcy for help:

#1 – Rising healthcare costs

As we age, healthcare costs naturally rise, and it consumes an increasing percentage of income. According to a study by the Kaiser Family Foundation, 1 in 3 spends up to 90% of their Social Security Benefits on medical costs.

Those with Medicare find that the benefits don’t cover many services and require copays, coinsurance, and deductibles for certain services. For those not on Medicare, the rising premiums and deductibles for Affordable Care Act plans is also concerning.

#2 - Inadequacy of social security benefits

Cost of living in the US has been on a consistent rise for some time. Younger Americans still active in the job market and at their earning peak (or headed that way) are better able to cope with the cost of living increases.

By comparison, Social Security cost of living increases don’t reflect the rising cost for seniors. Those retired have a fixed income. Those still in the job market might find themselves marginalized in favor of younger workers.

#3 - Lost home equity in recession

For many seniors, home equity is a major source of their retirement assets. With a 30-year mortgage, paying off the family home may coincide with retirement giving the senior an asset they can depend on in their golden years.

During the great recession, unemployment and the real estate crash devastated home values and income. Many people refinanced to try and save their home, taking out equity to stay afloat. Some sold their homes when values were lower. Devalued assets set the stage for future problems.

#4 - Many lost retirement funds in the dot-com bubble in the 90s

Back in the 90s, dot-com stocks and the NASDAQ were flying high. It was also around the time of the bank debacle, mortgage crisis, and too many other consequences of an over-exuberant market. Many Americans lost large chunks of their retirement to bad investments.

That left retirees with far less than they planned and likely too late in their career to rebuild their once-healthy 401(k) and IRA retirement accounts. Combine that with loss of home value, and you’ve got a financial firestorm brewing.

#5 - Not enough retirement savings

There’s also that segment of seniors who saved inadequately for retirement. For some, they might have procrastinated. For others, they might have saved, but then dug into their assets to deal with the recession, unemployment, divorce, or helping their family.

#6 - Living longer costs more

It’s great news that lifespan in America is ever-increasing. The only downside is that the longer you live, the more it costs to keep living. Combine that with higher medical expenses the older you get, and it simply costs more. Many retirement accounts won’t last as long as lifespan.

#7 - Helping adult children  

The Consumer Bankruptcy Project study found that more than one-third of respondents said one of the drivers of their bankruptcy case was helping others. Seniors often help adult children, take in boomerang kids that bounce back home, or finance college for grandkids.

#8 - Student loans follow them

Student loans still plague some seniors into their golden years since the debt has no statute of limitations. Seniors might be dealing with their student loans or co-signed loans for kids or grandkids. Federal debt collectors might also garnish Social Security payments for student loans.

If you’re a senior struggling with debt, North Carolina bankruptcy might be the best solution to ease the stress and give you financial peace of mind. To find out more, read reviews from clients, then contact the Law Offices of John T. Orcutt. Call +1-833-627-0115 to schedule a free bankruptcy consultation at one of our locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro or Wilmington.

Resources:

Research paper