In a recent study published by the Social Science Research Network, it was reported that bankruptcy rates among America’s elderly population are more than doubling. Specifically, the study found that the rate of Americans over 65 years old filing for bankruptcy has increased by 204% from 1991 to 2016. Moreover, the study indicated that, of all individuals filing for bankruptcy in the United States, the number of older adults filing for bankruptcy has increased five times over the same 25-year period. Why is this the case? There are two primary reasons: (1) increasing medical costs; and (2) lack of income.
Reasons Older Americans Are Filing For Bankruptcy
According to the study, increasing medical costs are the primary cause of Americans over 65 years old filing for bankruptcy. One of the authors of the study, Deborah Thorne, attributes the current Medicare system for this phenomenon. Specifically, Thorne believes that, while Medicare provides excellent medical coverage for some health issues, it does not cover all medical conditions or problems, namely extensive care for specific illnesses, procurement of hearing aids, many dental procedures, eye exams, or foot care. Accordingly, to receive these types of medical care, elderly Americans must either purchase additional medical insurance, which can carry rather lofty premiums, or pay for the medical care out of pocket. In addition to Thorne’s hypothesis that high medical costs cause elderly Americans to file for bankruptcy, financial services company Fidelity Investments also posit that, due to increasing costs of medical care, an American couple aged 65 that retire this year must have $280,000 saved in order to cover the costs of their medical care throughout retirement. While this estimate is only 2% higher than last year, Fidelity’s estimate this year is 75% higher than the estimate Fidelity projected in 2002, which was $160,000.
In conjunction with higher medical costs, a nationwide decline in Social Security and pension payments contribute to the reason why older Americans are filing for bankruptcy more frequently than in the past. It was reported by the Social Science Research Network that out-of-pocket medical costs of elderly Americans who use Medicare constitute 41% of the average Social Security income in 2013. This percentage is expected to increase to 50% by 2030. Moreover, according to the National Council on Aging, approximately 20% of elderly Americans report that missed utility payments is the biggest economic issue they face. What is more is that elderly Americans have racked up crippling amounts of credit card debt to pay their daily living expenses. In 2016, 34.2% of senior citizen households held credit card balances and 29.2% owe money on mortgages, home equity lines of credit, or both. The rise in credit card debt among older Americans can be partly attributed to the fact that these senior citizens grew up with parents who lived through the Great Depression, and, therefore, feel ashamed to admit that they cannot pay their bills. Instead, they opt to pay bills with credit cards, for which they often can only afford to make the minimum payments. This inability to pay the minimum monthly balance due contributes to the increase in bankruptcy filings among older Americans because very little, if any, of those payments are applied to the principal owed on the credit card.
Whether the high costs of medical care or failure to pay expenses with reduced income causes an older American to declare bankruptcy, this new study reveals that the decades-old stereotype that only “crooked” businesses declare bankruptcy has been debunked.
Contact a Clifton Bankruptcy Attorney for a Consultation About Elderly Bankruptcy in New Jersey Today
If you are struggling with debt, you may need a fresh start financially. An experienced bankruptcy and debt relief attorney can help you explore your options and determine the best course of action for you, your family, and/or your business. The experienced New Jersey bankruptcy lawyers at Silverman & Roedel, LLC understand the nuances of NJ and federal bankruptcy laws, so we can help you protect your interests. Call us anytime at 973-772-6411 or fill out the online contact form to schedule a confidential consultation. We have an office conveniently located at 1187 Main Avenue, Suite 2C, Clifton, NJ 07011.
The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney-client relationship. If you are seeking legal advice, please contact our law firm directly.