Michelle Singletary at WA Post about finances for seniors

Retired and broke: Bankruptcy filings surging for seniors

Mark Molnar cleans a restroom in an RV park in Trenton, Maine. Molnar and his wife, Joanne, are “workampers,” mainly retirement-age couples who work seasonal jobs at RV parks and camping parks for minimum or relatively low wages during the summer months. (Photo Linda Davidson/The Washington Post)

August 13, 2018

We were going over her budget and it didn’t look good.

She was retired and in her late 60s. Her only income is Social Security. Between the cost of health care, medicine, food and rent there wasn’t really anything left over to handle the thousands of dollars of credit card debt. Credit was the bridge she used to extend her benefit check.

“You need to file for bankruptcy,” I said.

She didn’t say anything for quite some time.

“But I pay my debts, always have,” she finally responded. “Scripture says, the wicked vow and don’t pay.”

For all of her working life, she had sufficient income to cover her expenses. But now there just wasn’t enough. Even if she just paid the minimum due, she would be in her 90s before it was all paid off. The stress of debt was too much to bear. By the time she got over her embarrassment to ask for help, bankruptcy was the only viable option.

Filing for Chapter 7 bankruptcy was devastating to her. Yet, it was what saved her from the increasingly aggressive letters and calls from creditors. Things are still very tight, but she’s making her meager ends meet.

Last week, a lot of news outlets jumped on this detail: Data from the Consumer Bankruptcy Project show that bankruptcy filings by people 65 and older are climbing.

“The social safety net for older Americans has been shrinking for the past couple decades,” according to the paper “Graying of U.S. Bankruptcy: Fallout from Life in a Risk Society.” “The risks associated with aging, reduced income and increased health care costs, have been offloaded onto older individuals. At the same time, older Americans are increasingly likely to file consumer bankruptcy, and their representation among those in bankruptcy has never been higher.”

There has been more than a two-fold increase in the rate at which older Americans file for bankruptcy protection and almost five-fold jump in the percentage of older persons in the bankruptcy system, according to the research compiled by a group that includes Deborah Thorne at the University of Idaho, Pamela Foohey of the Indiana University Maurer School of Law, Robert Lawless of the University of Illinois College of Law and Katherine Porter of University of California Irvine School of Law.

“The magnitude of growth in older Americans in bankruptcy is so large that the broader trend of an aging U.S. population can explain only a small portion of the effect,” the researchers wrote. “In our data, older Americans report they are struggling with increased financial risks, namely inadequate income and unmanageable costs of health care, as they try to deal with reductions to their social safety net.”

They report that the median senior bankruptcy filer has a negative net worth of $17,390.

Here’s a chilling proclamation from the report: “For an increasing number of older Americans, their golden years are fraught with economic risks. . . . Absent significant policy changes that reassume the risks of aging and effectively insure the financial stability of older Americans, our data suggest that the trend of an aging bankruptcy population will continue. For older Americans, bankruptcy is too little too late. By the time they file, their wealth has vanished, and they simply do not have enough years to get back on their feet.”

Last week, I was on NPR’s 1A to talk about this trend. I was joined on the show, hosted by Joshua Johnson, by Thorne, the principal investigator of the Consumer Bankruptcy Project, and by Cindy Hounsell, president of the Women’s Institute for a Secure Retirement (WISER).

Listen to: Baby Boomers In Bankruptcy

“Oh, c’mon: who could have possibly imagined that the systematic theft of Baby Boomers’ pensions to artificially inflate stock prices and temporarily increase corporate profits would ever have any adverse effects on actual people?” one listener wrote.

If things aren’t so bad financially and you want to avoid bankruptcy read: Ready to pay off your credit cards? Try the ‘Debt Dash’ method

Retired or not, read: Are you plagued by the serial get-out-of-debt disorder?

Also check out: Should you retire your debt before retiring?

I spent several years of my career reporting on bankruptcy. And this I know: For most, it’s not an easy decision. I never saw people skipping out after a bankruptcy hearing elated that they had their debts wiped out. I saw people ashamed and beaten down, who felt in the end that filing for bankruptcy protection was their last resort.

Your thoughts

Have you had to file bankruptcy in your senior years? Why? And have you recovered financially since filing? Send your comments to colorofmoney@washpost.com. Please include your name, city and state. Put “Senior Bankruptcy” in the subject line.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: