Older Americans filing for bankruptcy as financial pressures mount
As pressures from caring for adult children and aged parents tax those in the middle, the number of older bankruptcy filers is increasing.
April 11, 2013
Older Americans filing for bankruptcy as financial pressures mountArticle provided by Thrush & Rohr LLC
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The recent economic collapse affected older Americans disproportionately. Many saw the value of their estates dwindle as investments declined in value and little or no income came in from interest on savings. According to a recent report by the AARP's Public Policy Institute, more Americans over the age of 60 are struggling with debt. This has pushed many to consider bankruptcy.
The institute's research found that older Americans are carrying the highest credit card debts. They found that an average individual over the age of 50 has a credit card balance of $8,278. That was about $2,000 more than the average for those under the age of 50.
Some of the debt that older Americans carry is tied to medical expenses, but often gifts to relatives are in the mix. Young people face one of the toughest job markets and often parents help by co-signing on student loans or apartment leases and helping adult children make ends meet. Weddings and down payment assistance on a first home also stretch some baby-boomers more than they care to admit.
Many people above the age of 60 also provide for aged parents who may need additional funds to cover nursing facilities or specialized memory care centers.
All these pressures may account for the increase in bankruptcy filings for those over the age of 45. A study published in the American Bankruptcy Journal several years ago found that the median age of bankruptcy filers had increased from 1994 to 2007. Bankruptcy petitioners above the age of 45 made up only 27 percent of those filing in 1994, but the proportion had increased to 50 percent in 2007.
Debt relief through bankruptcy
Bankruptcy and the automatic stay provide a solution for those struggling with credit card and medical bills that they cannot afford to pay. An individual can obtain relief either through a Chapter 7 or Chapter 13 bankruptcy.
In a Chapter 7 bankruptcy, a trustee will sell all non-exempt property. The petitioner receives a discharge of all non-secured remaining debt following the sale. A common misconception is that you lose everything in a Chapter 7, but this is not the case. Some exempt assets include, a vehicle worth up to $4,500, retirement accounts and a portion of the value of your home.
For homeowners with regular income and sizeable equity in their homes, Chapter 13 might be a better option. A Chapter 13 filing involves a three- to five-year repayment plan. After completing the payment plan, any remaining debt is discharged. One other benefit of Chapter 13 is that it also halts the foreclosure process.
Bankruptcy is a complex process with important deadlines. If you are falling behind each month and do not see a way out as late penalties accrue and interest compounds, an important first step toward a fresh start is to consult with an experienced bankruptcy attorney. A lawyer can discuss the pros and cons of the different bankruptcy filing options and which might provide you with needed relief.