More Seniors Struggling With Debt

July 01, 2012

More Seniors Struggling With Debt

While Americans of all ages struggle through difficult economic times, senior citizens are among the most financially vulnerable. A staggering number of the aging population are battling debt. The financial burdens faced by many baby boomers as they retire are becoming apparent.

Economists, financial professionals and lawyers are seeing a significant increase in the number of seniors with debt problems. More households include at least one individual over age 50 with personal debt. Nearly 82 percent of individuals ages 55 to 64 carry personal debt. The average household debt in homes with individuals 55 and older is over $70,000.

Not surprisingly, more seniors are correspondingly filing for bankruptcy. Filing rates have increased for adults over age 65 faster than any other age group. The median age of individuals filing for bankruptcy rose from 36.5 in 1991 to 43 in 2007.

Why Are More Seniors in Debt?

Many factors are behind this alarming trend. Medical bills play a large role. As Americans age and health care costs keep increasing, more seniors and their families are simply unable to keep up. In addition, fewer employers are sponsoring health insurance for workers, leaving them responsible for a larger share of the costs of unexpected serious illnesses like cancer. Further, Americans must wait until age 65 to qualify for Medicare.

More Americans also carry home mortgage debt. Those who took on home mortgage loans during the years of easy credit are now faced with depressed home values. Many who used additional home equity to obtain second or third mortgages face financial catastrophe.

Credit card and student loan debt are also to blame. Older Americans have 50 percent more credit card debt than other age groups. For those age 65 and older, the average amount of debt now exceeds $10,000, a nearly 25 percent increase from just three years ago. Nearly 20 percent of student loan debt is owed by Americans over age 50. Finally, the financial crisis trashed many Americans' personal and retirement savings while greatly reducing the availability of jobs.

Bankruptcy Protection

Bankruptcy provides a lifeline for seniors to obtain relief from overwhelming debt. Both Chapter 7 and Chapter 13 bankruptcy protection can eliminate or reduce unsecured debt of the type faced by many over 65: credit card debt and medical bills. Chapter 7 bankruptcy may exempt retirement accounts from seizure and exclude Social Security benefits when considering qualification for Chapter 7. Chapter 7 bankruptcy also offers a homestead exemption, meaning that seniors can protect their home equity in certain situations.

Bankruptcy also immediately stops creditors from harassing debtors with collection notices and phone calls.

This is just an overview of some of the protections that bankruptcy can provide, depending on an aging individual's particular circumstances. Seniors struggling with debt should contact a bankruptcy attorney to discuss what legal or financial options are best for them.

Article provided by Nathan Erlich, P.C.
Visit us at http://www.erlichpc.com