Seniors are the fastest growing group of bankruptcy filers. There are several reasons for this, ranging from long term demographic trends to the recent economic downturn. Why are seniors the fastest growing group of bankruptcy filers?
Part of this is due to the gray wave, the aging of the population. Baby Boomers for decades have been the largest demographic group in the country. As they retire and occasionally file for bankruptcy, the rate of filings for this group increases simply because a greater percentage of the population is classified as senior.
Another reason is the housing bust. There are many people who expected to sell their house for a handsome profit, downsize to a smaller property at retirement, and live off capital gains in retirement. When someone had to sell the house due to an inability to maintain it, the lower property values mean that they do not have the expected nest egg to live on. Without this extra financial cushion, pension payments and Social Security don?t cover the bills, with seniors racking up credit card debt to make up the difference. In other cases, seniors took out reverse mortgages that were not paid off when the house was sold.
Home equity loans taken out to refurbish a home so that someone with declining mobility to live in increased the debt secured by the home. When the senior then moved into a nursing home and sold the home, it might sell for enough to pay off the debts but without money to pay for continued care. In worst case scenarios, they sold the house for less than it is worth and owes money on a home they no longer live in.
Bankruptcy has also grown due to shifts in public policy. Public sector union employees are seeing their pensions reduced because local governments did not pay enough into the funds during good years or made overly optimistic financial projections that don?t cover everyone who is now retiring. The federal government has held down cost of living adjustments to Social Security by understating the rate of inflation. This lowers the monthly payments that are paid to seniors on Social Security despite the growing Medicare premiums while flattening the interest that seniors would otherwise receive on their savings. Costs go up, but seniors get less money. This ruins a well planned retirement budget. Medicare also covers less and less, with hearing aids and dental services being two of the most costly but uncovered services seniors must pay for themselves. When unexpected medical costs arise, seniors may dip into their savings and have less future interest income to live upon. Or they end up making payments on medical bills or go into credit card debt.
Age can also bring disability that ruins a well planned retirement. Dementia and Alzheimer?s disease rates are increasing. Elders who forget to pay bills or simply fail to open mail belonging to a deceased loved one causes minor bills to grow into mountains of debt. A sudden heart attack or stroke can leave someone in the hospital without the means to pay for rehabilitation, ruining a retirement plan that required a few more years of working in order to work. An unplanned nursing home stay, even if the senior recovers and returns home, runs up tens of thousands of dollars that is not covered unless they had long term care insurance.
Relying up on family to pay these unexpected bills or make up for income shortfalls isn?t possible when 10% or more of the 25-55 population is unemployed or underemployed. The only solution for many of these seniors see to get rid of their medical debts or personal debts relative to their declining ability to pay is bankruptcy.
?Michael Bolinske is a Minnesota bankruptcy attorney at Bolinske & Bolinske helping families get a fresh financial start.
(examples: auto, banking, college, credit cards, debt, frugality, insurance, investing, loans etc.)
Source: http://www.fullfinance.com/seniors-are-the-fastest-growing-group-of-bankruptcy-filers/
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