Bankruptcies Rise Fastest for Over-55 Group
Friday, April 27, 2007
Personal bankruptcy filings by people 55 and older are growing faster than those by any other age group, in part because of rising mortgage debt and medical expenses among seniors, a study published yesterday concludes.
Although the U.S. population as a whole is getting grayer as the baby boom generation ages, the percent of older people seeking to wipe out debt through bankruptcy is rising even faster, the study by two government researchers at the Administrative Office of the U.S. Courts shows. That office includes the U.S. bankruptcy court system.
"It's frightening," said Dallas Salisbury, president of the Employee Benefit Research Institute, a private nonprofit group that focuses on retirement and economic security issues. "This just underlines that an awful lot of older people not only haven't saved enough, but by going into bankruptcy, they are starting over at a point in life when it's harder than ever to save."
The government researchers compared personal bankruptcy records from 1994 with those in 2002. In that time span, personal filings doubled, to more than 1.5 million. The credit industry used that growth to persuade Congress to pass legislation in 2005 that makes it harder for individuals to wipe out debt through bankruptcy.
The portion of the population aged 55 or older grew from 29.2 percent in 1994 to 30.1 percent by 2002, an increase of 3.1 percent, according to the U.S. Census Bureau. The study found the portion of this age group that filed for bankruptcy protection grew from 9.6 percent in 1994 to 14 percent in 2002 -- a 45.8 percent jump.
The findings come as other studies show older people increasingly rely on home-equity loans and credit cards to pay for medical expenses, and as financial experts worry that Americans don't save enough and are unfit financially for retirement.
"This confirms the notion that issues like health care are an important driver of bankruptcy," said David Certner, director of legislative policy for AARP. He said it supports his view that medical expenses weren't given sufficient consideration when the new bankruptcy law was passed.
Ed Yingling, head of the American Bankers Association, one of the main supporters of the new law, agreed rising medical costs are pushing people to run up credit-card debt. But he said that it is the health-care crisis -- not credit card debt -- that is responsible for pushing people under. He said the new bankruptcy law has the safeguards to give relief to those truly in need because of health or any other difficulty.
Travis Plunkett of the Consumer Federation said the credit card industry has to shoulder some of the responsibility because once the elderly ring up charges to pay for health care, their financial plight is amplified by what he called the unfair fees and interest rates charged to consumers.