A depressed older woman sits with her head in her handsFor an ever increasing number of older Americans, particularly those over the age of 65, conventional ideas concerning life in retirement are being contradicted by an unfortunate reality, which is bankruptcy. Our estate planning attorneys have learned recently that more and more older individuals in the United States are turning to this last resort process when debt and financial burdens reach the point where repayment is no longer a viable reality.

Contributing factors to this undesirable solution include inadequate savings, soaring medical expenses, vanishing pensions, and the burden of taking on financial responsibility for others. As of 2018, the rate of individuals 65 years or older declaring bankruptcy is triple what it was in 1991.

Decline in Social Safety Nets

A recent study suggests that a three decade decline in the social safety nets provided by the government and employers has contributed greatly to this new bankruptcy trend. For example, there are longer waits for full Social Security benefits, more out-of-pocket spending for health care services once covered by Medicare, and the replacement of employer-sponsored pensions with personal saving plans are compounding challenges older Americans face regarding their finances.

The study, conducted by the Consumer Bankruptcy Project explains that older people have few places to turn other than bankruptcy court when their financial situation becomes near- impossible. Obviously, declaring bankruptcy can offer a new start for individuals facing such problems, but often, by the time filers complete the process, their wealth is gone and they do not have a sufficient number of years to ever get back on their feet.

Even though the actual number of older individuals declaring bankruptcy is not extraordinarily high, approximately 100,000 per year, researchers state that it is still almost triple what it was in decades past. University of Illinois law professor, Robert M. Lawless, is the author of another study. This one states that the actual number of older individuals in financial distress may be much higher, as many struggle to work in order to avoid bankruptcy.

Retirement Debt

More people are also carrying debt into retirement, which was once an uncommon situation, according to the Employee Benefit Research Institution. Not entirely surprisingly, the lowest-income households among people 55 or older are also the households that carry the worst income to debt ratios, with over 13 percent of such households facing a debt load that equals over 40% of their income.

Additionally, the finances of older Americans are being strained by the needs of others. For instance, approximately a third of senior citizens interviewed in a researchers’ survey said that assisting older parents, children, and other relatives contributed to their ultimate bankruptcy.

Responsibility for Others

Certain individuals even cosign loans for children, including student loans, and when their children are unable to pay, the burden of debt falls on the elderly parents. Other circumstances, such as a late life divorce, death of a partner, or the burden of raising grandchildren also put older Americans in situations where they cannot pay their bills and must seek bankruptcy as a last resort solution. This has created a growing need for resources to help older individuals in financial crisis.