Older Americans Are Filing for Bankruptcy Now More Than Ever. Here's Why.
By Tracy L. Hirsch
The number of baby boomers who file for bankruptcy has increased almost 300% in the last three decades. Here’s why they have more debt than the generations before them.
Baby boomers are in an unprecedented situation compared to the generations that came before them. A study from the Consumer Bankruptcy Project found that older Americans are more vulnerable than ever in terms of lacking a financial safety net.
The number of people age 65 and older who file for bankruptcy has almost tripled since 1991, and is still rising. As a Kentucky bankruptcy lawyer, I have personally started to see this increase as well.
Why is this the case?
There are multiple factors, and every single one of them are unique to this generation of baby boomers. Here are the top four reasons that more and more older Americans are turning to bankruptcy for debt relief.
1.) A steady decline in income.
More and more people who are at the typical retirement age no longer have the income that older Americans once had. There’s been a rise in loss of pensions and delays in receiving full social security benefits, which means that a large percentage of older Americans have little to no income if they are no longer able to work.
If they are able to work, they often have to fight to keep a seat at the table, as many companies are ready to replace them with a younger, more malleable employee who can be paid a much smaller salary.
With the loss of pensions and delayed social security, this means that many baby boomers have little money in their savings accounts. This can be the impetus for insurmountable debt when unexpected bills arise, which leads us to the next point.
An increasing number of baby boomers are seeking relief through bankruptcy petitions, and the reasons aren’t all that surprising.
2.) Rising healthcare costs.
Roughly two-thirds of bankruptcy cases, regardless of age, are due to medical debt. The baby boomer demographic makes up a decent portion of that category, as they often have increasing medical needs due to age-related issues. Now that Americans are living longer, they’re paying a price (literally) for the privilege to do so.
With medical bills becoming much greater than their true market value, it can be difficult to stay on top of those bills, even with health insurance. A major surgery that goes toward a high deductible plan with a high out-of-pocket maximum can financially ruin anyone, including senior citizens.
3.) Student loan debt.
You may be wondering how many people from age 55 to 75 (and even some who are older than that) actually have student loans related to their own education, and that’s a valid question. While it’s a smaller percentage than younger demographics, many baby boomers have educational debt that isn’t related to their own degree(s).
Many older Americans have taken out loans to pay for their children’s and grandchildren’s degrees, hoping to give them a stable future. Unfortunately, that has put many baby boomers in a financially disadvantageous position.
4.) An acceptance of debt.
A large factor in the rise in bankruptcies for baby boomers is the shift in perspective. Many older Americans are more inclined to take on debt than their parents were, as it’s basically a way of life now compared to how it was in the 1930’s and 40’s.
While baby boomers’ parents mostly paid cash for everything, including homes, cars, appliances, etc., baby boomers (and the generations after them) are part of a culture where those types of purchases are now made with borrowed money (i.e. types of debt that are now socially acceptable).
This is mostly due to the fact that many jobs do not pay to keep up with inflation rates, which forces the majority of Americans to take out lines of credit to pay for basic necessities. This means that all demographics, including senior citizens, are reliant upon credit card debt and personal loans to avoid garnishments and judgment liens.
While lines of credit may help for smaller amounts of debt, they often make the problem worse, as high APRs are attached to them. If you are over the age of 55, planning for retirement, and have more debt than you can pay, there’s no shame in seeking relief through bankruptcy.
An experienced bankruptcy lawyer in Kentucky will be able to help you weigh your options to see if a Chapter 7 or Chapter 13 will give you the fresh start that you need.
There’s no better time than the present to get on a path to financial freedom!
All the best,
Tracy L. Hirsch
Hesitant about discussing bankruptcy? Unsure if it’s right for you? I understand. That’s why my consultations are always free. You have nothing to lose, so call or text at (502) 435-2593 to schedule your free consultation today!