Why are so many people over 55 going bankrupt?

By Lucy Lazarony

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This article is reprinted by permission from NextAvenue.org .

The number of people 55 and older filing bankruptcies has skyrocketed since 1991, and that’s even more true for those 65 and older.

Bankruptcy can offer a fresh start if you’ve fallen on tough times and are unable to pay your bills. Once you file bankruptcy, you’re no longer responsible for the debts that are discharged. But this fresh start comes with a price: your credit will be negatively affected for years.

Six out of 10 people 65 and older who file bankruptcy do so because they can’t afford to pay their enormous medical bills.

According to a paper by Robert Lawless, a law professor at the University of Illinois, and three colleagues:

• The percentage of Americans declaring bankruptcy age 55 to 64 has risen 66% from 1991 to 2016

• The percentage declaring bankruptcy age 65 to 74 increased 204% from 1991 to 2016

• Roughly 12% of bankruptcy filers are now 65 and older, up from about 2% in 1991

Why are so many older adults going bankrupt?

One major factor behind the rise of these bankruptcies: medical debt. In fact, six out of 10 people 65 and older who file bankruptcy do so because they can’t afford to pay their enormous medical bills, Lawless says.

Steven, 66, a retired handyman (who prefers not to reveal his last name or location) says his “multiple injuries” led to medical bills that he couldn’t pay. And those bills led him to declare bankruptcy in April 2019.

Declaring bankruptcy helped wipe clean the medical bills he couldn’t pay. Steven’s focus now is staying in his house; he has lived there for 40 years. He’s working out a loan modification with his bank to continue residing there.

“I’m just trying to keep moving and keep going,” he says.

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Lawless says that many older Americans who file bankruptcy have “run out of resources.” They no longer have savings. And because most are no longer working full time, if at all, they have “less ability to cope” with financial struggles that lead to bankruptcy than their younger counterparts.