More seniors than ever are filing bankruptcy
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An unprecedented number of seniors are now filing bankruptcy. New research has shown that since 1991, bankruptcy filings for Americans 65 and older have tripled. Data from the Consumer Bankruptcy Project shows that seniors now make up a larger percentage of bankruptcy filers than ever. The takeaway is that bankruptcy is the last hope for many older Americans and the problem is growing.
A dwindling Social Security net
In the past, many companies offered pensions and Social Security was a safety net, not the sole source of retirement funds. But the job market changed rapidly and aside from government jobs, few employers guarantee pension. You must build a nest egg for yourself in a 401(k) or IRA account. Plus, people change jobs more often, so they don’t stick around even at places that offer pensions.
What was supposed to be a safety net turned into over-reliance and now many seniors live only on Social Security benefits. Even for those with pensions, increased life spans can mean inadequate finances for many as funds run out. With increasing debts, longevity, medical concerns, and kids looking to their aging parents for help with debt, it’s a financial mess for many older Americans.
According to the study, younger Americans have been able to confront this risk shift, but the adjustment is harder for older citizens, simply because of their age. They find it harder to get jobs and cope with dwindling income along with the increased out of pocket spending for medical care, among other financial factors.
Rising medical costs
The changes to the health insurance system in America in recent years intended to lower costs but for many, out-of-pocket costs, premiums, and deductibles rose. For those earning too much for government subsidies, it can be problematic. Even if you have premium subsidies, deductibles that range from $3-$7k per person can be overwhelming.
Medicare helps but doesn’t cover everything, and we accrue more medical expenses, on average, in the latter years of our lives than at any other time. Medical bills are a common reason for filing bankruptcy at any age but even more so with seniors. The good news is that bankruptcy completely wipes out debt like medical expenses.
Increase in bankruptcy filers
The consequences of this shift in risk have left many older Americans gasping under increased burdens while dealing with forced early retirement, fixed income, or declining earnings if they still work. The result is an increase in the overall debt that they carry, compared to the period before the shift.
In 2001, for instance, 50.2% of households headed by someone aged 60 or older carried debt. This number had increased to 61.3% by 2013. In the same period, the median amount owed by these households more than doubled from $18k in 2001 to $41k in 2013, according to data from the National Council on Aging.
This shift and its consequences have driven more seniors than ever to look towards bankruptcy as a last resort. Between 1991 and 2016, the increase in bankruptcy filers among seniors leaped 204%. In the same interim, seniors grew rapidly to a bigger slice of overall filers. They now make up 12.2% of all filers compared to 2% in 1991, which is an increase of 500%.
If you’re a senior overwhelmed by debt and not sure where to turn, bankruptcy might be the answer to your debt woes. Depending on your assets and equity in your home, Chapter 7 is often the better option since it represents sweeping debt relief. Chapter 13 helps those that are behind on secured debt (mortgage, car loan, etc.) while also diminishing or discharging unsecured debt.
Seniors stuck with debt may want to consider bankruptcy counseling. Read reviews from clients then call 1-888-234-4181 to reach the Law Offices of John T. Orcutt to schedule a free bankruptcy consultation at one of our locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.