Growth In Seniors Filing For Bankruptcy Outpaces Younger Americans

Growth In Seniors Filing For Bankruptcy Outpaces Younger Americans

There’s been a remarkable increase in the number of bankruptcy petitions filed by seniors, age 50 and older, in recent years. And older filers are beginning to represent a larger percentage of those filing for bankruptcy. According to an article by John Golmant and James Wood of the Administrative Office of the U.S. Courts in Washington, D.C. that appeared in the September 2010 issue of ABI (American Bankruptcy Institute) Journal, “this significant demographic uptick in older bankruptcy filers is outstripping the aging of the general population as a whole.”

“The recent housing crisis worsened the already precarious financial condition of many older Americans,” they wrote. A study performed in 2008 found that twenty-eight percent of all mortgage delinquencies and foreclosures were for people age 50 and older. Seniors are often targeted for risky subprime mortgages, and refinancing, because they often have accumulated equity in their homes. Compounding problems, the net worth of seniors appears to be in decline. With the collapse of housing values, many seniors now have little or no home equity, the authors said.

Credit card debt is also playing a big role, as well as healthcare costs. Another study by Stetson University College of Law professors Theresa Radwan and Rebecca Morgan found that seniors are “vulnerable to bankruptcy” and that more bankruptcies are caused by a combination of low income and the high expenses of everyday living than by a single financially catastrophic event. They also said that general credit card debt used to pay for basic necessities appears to be a leading cause of bankruptcies, outweighing even medical debt in their survey.

Radwan and Morgan wrote, “That system (Social Security) must also ensure that enough funds are available to meet the needs of those receiving benefits, and must account for increased prices of common items, because a small increase in expenses may be enough to trigger financial distress for one on a limited income…Reliance on Social Security, pensions, and savings has not been enough for so many of today’s older population.”

And although these statistics are grim enough, this may just be the tip of an iceberg. The most recent data on bankruptcy filings only covers through 2008. We don’t yet know how senior bankruptcies may have been affected by two years of no cost-of-living adjustments (COLAs) in the midst of spiking costs and slow economic recovery. The American Bankruptcy Institute estimates that this year alone personal bankruptcies are on track to approach 1.6 million new cases, the largest number since Congress changed federal bankruptcy law in 2005.

TSCL is meeting with Members of Congress and telling them that seniors need a more fair and adequate COLA to ensure that Social Security remains a stable source of income. TSCL supports legislation that would calculate the COLA based on an index that more fairly accounts for senior costs - - like the Consumer Price Index for the Elderly (CPI-E), H.R. 456, introduced by Representative Charles Gonzalez (TX-20), and H.R. 798 introduced by Representative Peter DeFazio (OR-4). To view all the bills that would provide a fair COLA supported by TSCL, visit or call 800-333-8725.

Sources: “Aging and Bankruptcy Revisited,” John Golmant, and James Wood, Administrative Office of the U.S. Courts in Washington, D.C., ABI Journal, September 2010. “The Elderly in Bankruptcy and Health Reform,” Radwan and Morgan, Georgetown Journal on Poverty Law & Policy, Fall 2010.