According to an article in Forbes, yet another example of how the United States treats its elderly is the rapid “graying” of bankruptcy over the past few decades. The author of the Forbes article was actually reporting on an article in the U.K.’s Financial Times who told the story of the sad and uncomfortable situation regarding elders in American bankruptcy courts. (https://www.forbes.com/sites/teresaghilarducci/2019/08/15/elderly-bankruptcy-why/#2639d5bd4f51).
The share of elder filings for bankruptcy jumped from two percent of all filings in 1991 to 12 percent now. This is documented in a recent research paper out of Indiana Legal Studies called “Graying of U.S. Bankruptcy: Fallout from Life in a Risk Society.” This means that approximately 98,000 families, or about 133,000 elders, out of 51 million people over the age of 65 file for bankruptcy to get relief from all debt. (Note that student debt is non-dischargeable; this if often a result of co-signing student loans of children and grandchildren). Of elder households who filed for bankruptcy in 2016, 78 percent made less than the median income.
Several factors are listed as possible reasons for the debt level of seniors in the U.S. They are described as “big impersonal forces.” For instance, trade unions have weakened, wages have stagnated, and pensions have eroded. Companies have eliminated pension plans with their attendant risk by switching to less-certain (for the worker) 401(k)-type options. The “do-it-yourself” 401(k)-based retirement system requires long term employment and steady contributions for success. Now many older workers in their 50’s are being discarded from the labor market and cannot find decently paying work nor are they able to contribute to their 401(k)s.
Another force that older persons have no control over is the rise in medical costs. Medicare is paying a smaller share of elder health care due to political decisions. Medical cost increases, along with political decisions to have Medicare pay smaller shares of health care costs result in devastated budgets of seniors.
Predators are another source that increases bankruptcy risk among seniors. Low interest credit cards are hyped, even to recent bankruptcy filers. Many seniors do not know how to make ends meet without using credit, including mortgages on their homes. The positive psychological effect is that creditors will stop harassing them. It does no good to blame the victims for not taking lessons for living within their means like their Depression era ancestors did; times are different and we need to find relevant answers to elder poverty.
The legal advice in this column is general in nature, Consult your attorney for advice to fit your particular situation.
Kathleen Martin, Esquire is licensed to practice in the Commonwealth of Pennsylvania and is certified as an Elder Law Attorney by the National Elder Law Foundation as authorized by the Pennsylvania Supreme Court. She is a principal of the law firm of O’Donnell, Weiss & Mattei, P.C., 41 High Street, Pottstown, and 347 Bridge Street, Phoenixville,610-323-2800, www. owmlaw.com. You can reach Mrs. Martin at email@example.com