A week before I wrote about why talking to an experienced New York bankruptcy lawyer can help avoid the high cost of dying in debt, The New York Times ran an article discussing the findings of legal academics on elderly Americans filing bankruptcy. Their new research identifies several unfortunate facts and trends that have been affecting bankruptcy filings among the elderly in the last thirty or so years. If you or a loved one is around retirement age, I’ll focus on some things you can do to prevent a bankruptcy.
First, though, here are some of the facts.
In 1991, only 1.2 per thousand Americans between the ages of 65 and 74 filed bankruptcy. In the 2013-2016 time frame, that fraction tripled to 3.6 per thousand. Bankruptcy debtors in the 55-to-64 bracket grew by 66 percent. Moreover, bankruptcies by younger Americans are much less common than in 1991, meaning debtors tend to be older than before. (Note that these comparisons are based on snapshots between two time periods and don’t capture the waves of bankruptcies in the early and late 2000s.) The authors eliminate the size of the baby boom generation as the culprit and instead point to “structural shifts” that took government and employment benefits from workers.
What were these shifts?
One is Congress’ decision to increase the age at which people can receive full Social Security benefits, but that’s not very convincing because it’s only gone up from 65 to 66 and two months in recent years. There isn’t much debtors can do about that except to recognize that Congress is taking anticipated benefits from elderly Americans and that it may continue to do so in the future.
More significant than government benefits is the gradual change from traditional employer-provided pensions to employee-contribution accounts. In the last several decades, businesses have become less interested in providing for their workers’ ultimate welfare and leaving it up to them to do so themselves with 401(k) plans. There are probably other more significant labor market trends, such as the shift from manufacturing to service-sector work that doesn’t pay as well as before.
One would think that the response for working Americans is to save more money, contribute maximally to their retirement accounts, etc. This is good advice in itself, but it hasn’t worked. Older Americans owe larger debts compared to the past. One quarter of householders aged 65 and above had less than $3,260 in liquid savings. Meanwhile, a greater share of them owe mortgage debt than in 1991, and many have co-signed loans.
Some of the added debt may be an aftershock of the real-estate bubble in the last decade, but there are alternatives for middle-aged debtors. Avoid buying more house than you can afford, and do not co-sign debts that you are unwilling to pay on your own if it comes to that.
Finally, the article cited increased spending on health care. Medical costs have risen substantially, and despite Medicare, many elderly Americans still pay substantial out-of-pocket costs for their health care.
The New York Times article is here.
Even though about 100,000 older Americans file bankruptcy each year, their prominence indicates serious financial strains on the elderly population as a whole. If you are facing serious financial hardship, then talking to an experienced New York bankruptcy can help you strategize your options. Bankruptcy can help eliminate credit-card debt, medical debt, and deficiencies from short sales.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced bankruptcy attorney Brooklyn NY Bruce Weiner for a free initial consultation.
