Bankruptcies Skyrocket Among Seniors Amid Soaring Health Costs

The steady erosion of Medicare and Social Security benefits, the shift away from defined benefit pensions, and rising health care costs have all been blamed for seniors’ financial woes over the last decade.

Now a group of researchers has the bankruptcy data to prove it.

Since 1991, the rate of Americans aged 65 to 74 filing for bankruptcy doubled, while the frequency tripled for those over 75, according to a new study by researchers from the Consumer Bankruptcy Project. In addition, one out of every seven bankruptcy filers in the United States is aged 65 or older.

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“This is nearly a five-fold increase over just two and a half decades,” the researchers, four professors at U.S. universities, wrote. “This is a notable demographic shift.”

The study, first reported in Sunday’s New York Times, bases its data on surveys collected between February 2013 and November 2016. The researchers asked 3,200 people who had declared bankruptcy about the circumstances that led them to take such a dramatic choice, and the reasons for older Americans frequently came down to medical expenses and debt.

“My wife developed medical problems and had to leave her job, resulting in a loss of income,” one respondent told the researchers. “About two years later, I developed medical problems and was not able to continue working. We got to a point where we simply could not handle the debt load. The constant calls from bill collectors forced us to contact an attorney for help.”

That individual was one of 62.2% who identified medical expenses as a key reason they entered bankruptcy, with many placing the blame on reduced government benefits for seniors. For instance, one respondent was forced into bankruptcy after a back surgery spurred several tests not covered under insurance.

“The next thing I knew, the bills began piling up,” the respondent wrote. “I got to the point I owed more than I was making on Social Security. To get out from under these medical bills I had to file bankruptcy.”

The Consumer Bankruptcy Project team also takes aim at policies that have increasingly pushed the retirement burden on individuals and not the government or employers — for instance, the steady replacement of pensions with self-managed 401(k) and IRA plans. In one case, a respondent noted that he or she mismanaged a retirement account while dealing with depression. Unable to restructure the debts incurred by unwisely leveraging the account, and with no job, the respondent turned to bankruptcy.

Lack of employment opportunities for older Americas only compounds the effects that bankruptcy has on seniors. Whereas younger filers can reasonably expect to return to a solid financial footing with the help of their careers, older people have no such luxury.

“Realistically, when older Americans file bankruptcy, they are most likely to experience a long-term, probably permanent second-class economic status,” the researchers write.

The only solution, in the researchers’ eyes, is to focus on strengthening the social safety net that has been weakened over the years since Lyndon Johnson’s Great Society legislation ushered in Medicare and Medicaid.

“At the core, the lessons of prior decades show that aid to older citizens must originate with our government,” the group concludes. “Community and charitable organizations, while having the best of intentions, are inadequate. Comprehensive policies led by our government will ensure financial stability for all elderly citizens.”

Written by Alex Spanko

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  • What is in this article is extremely sad to read, yet this is reality at it’s worse!

    So much that is in Alex Spanko’s article is factual. So many policies in force have increasingly pushed the retirement burden on individuals and not the government or employers! As “The Consumer Bankruptcy Project Team” points out that new policies of the government and employers have forced seniors to replace their pensions with self-managed 401(k) and IRA plans.

    As stated in the article, many seniors are mismanaging their retirement accounts by trying to do it themselves. Many are dealing with depression and are Unable to restructure their debts incurred by unwisely leveraging of their accounts.

    To top it off, with no job because the older you get the less you are wanted out in the work force and the lack of social security keeping up with the true cost of living increases, many seniors are turning to bankruptcy!

    This should not be happening in America but we have to go way back in time to see when it began and how it has mushroomed in time to the point we are at today!

    A HECM is not the complete cur-all but it will help out many senior homeowners who are in this position. It is up to us to seek out these seniors in need of our services and products, they are out there!

    John A. Smaldone
    http://www.hanover-financial.com

  • The vast majority of seniors don’t have to file bankruptcy if they have debt problems. Why? Because their income social security, pension, disability, VA benefit and even small wages are protected by federal law and can’t be garnished. They don’t have to deal with collector calls. There is a federal law called the Fair Debt Collection Practices Act that provides that collectors must cease contact when sent a “cease and desist’ letter.

    Sure they can file bankruptcy- but its probably because they don’t know any other option. Or they have been led to believe that is necessary by an attorney who wants to collect a fee. Thankfully there are many bankruptcy attorneys who tell seniors the truth- they don’t need to file bankruptcy. I think a more honest answer is that fewer Americans have been filing bankruptcy. The rates are down drastically. A few attorneys with fewer bankruptcy cases to file would rather suggest a bankruptcy and collect a fee from a senior who doesn’t need to file.

    Sure seniors have financial problems. The great recession of 2008 probably had more to do with that than anything. And life in general. But any article like this should always include the fact that seniors income is protected and safe. The old debt including medical debt they can’t afford to pay doesn’t have to be paid. Public Hospitals have to see seniors. Personal physical are satisfied to receive a small token payment. Most of the bill is being paid by Medicare. And except in rare instances, seniors don’t need bankruptcy. I should know I filed nearly 50,000 bankruptcies in the past. Eric Olsen Executive Director HELPS Nonprofit Law Firm.

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