We were going over her budget and it didn’t look good.
She was retired and in her late 60s. Her only income is Social Security. Between the cost of health care, medicine, food and rent there wasn’t really anything left over to handle the thousands of dollars of credit card debt. Credit was the bridge she used to extend her benefit check.
“You need to file for bankruptcy,” I said.
She didn’t say anything for quite some time.
“But I pay my debts, always have,” she finally responded. “Scripture says, the wicked vow and don’t pay.”
For all of her working life, she had sufficient income to cover her expenses. But now there just wasn’t enough. Even if she just paid the minimum due, she would be in her 90s before it was all paid off. The stress of debt was too much to bear. By the time she got over her embarrassment to ask for help, bankruptcy was the only viable option.
Filing for Chapter 7 bankruptcy was devastating to her. Yet, it was what saved her from the increasingly aggressive letters and calls from creditors. Things are still very tight, but she’s making her meager ends meet.
Last week, a lot of news outlets jumped on this detail: Data from the Consumer Bankruptcy Project show that bankruptcy filings by people 65 and older are climbing.
“The social safety net for older Americans has been shrinking for the past couple decades,” according to the paper “Graying of U.S. Bankruptcy: Fallout from Life in a Risk Society.” “The risks associated with aging, reduced income and increased health care costs, have been offloaded onto older individuals. At the same time, older Americans are increasingly likely to file consumer bankruptcy, and their representation among those in bankruptcy has never been higher.”
There has been more than a twofold increase in the rate at which older Americans file for bankruptcy protection and almost fivefold jump in the percentage of older persons in the bankruptcy system, according to the research compiled by a group that includes Deborah Thorne at the University of Idaho, Pamela Foohey of the Indiana University Maurer School of Law, Robert Lawless of the University of Illinois College of Law and Katherine Porter of University of California Irvine School of Law.
“The magnitude of growth in older Americans in bankruptcy is so large that the broader trend of an aging U.S. population can explain only a small portion of the effect,” the researchers wrote. “In our data, older Americans report they are struggling with increased financial risks, namely inadequate income and unmanageable costs of health care, as they try to deal with reductions to their social safety net.”
They report that the median senior bankruptcy filer has a negative net worth of $17,390.
Here’s a chilling proclamation from the report: “For an increasing number of older Americans, their golden years are fraught with economic risks . . . Absent significant policy changes that reassume the risks of aging and effectively insure the financial stability of older Americans, our data suggest that the trend of an aging bankruptcy population will continue. For older Americans, bankruptcy is too little too late. By the time they file, their wealth has vanished, and they simply do not have enough years to get back on their feet.”
Last week, I was on NPR’s 1A to talk about this trend. I was joined on the show, hosted by Joshua Johnson, by Thorne, the principal investigator of the Consumer Bankruptcy Project, and by Cindy Hounsell, president of the Women’s Institute for a Secure Retirement (WISER).
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Retired and broke: Bankruptcy filings surging for seniors