More older people filing for bankruptcy

More older people are filing for bankruptcy protection, and the top reason is credit card debt.

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But these older people aren't piling up credit card debt because they're eating out every night and taking fancy vacations, studies show. Instead, they are going into debt because they can't make ends meet and are hesitant to ask friends or family for help. In fact, some are suffering financially because they are helping friends and family.

Here is how USA Today explains the issue:

The ranks of older bankruptcy filers also have been swelling rapidly. From 1991 to 2007, bankruptcy filings by those 65 and older increased by 150%, while filings in the 75-to-84 age group soared 433%, according to the Consumer Bankruptcy Project.

Older Americans are staggering under debt because of a variety of problems -- from unexpected job losses late in life and underemployment to overwhelming medical bills and providing financial help to their children and grandchildren, analysts say. Making the issue even more serious: They have little time to climb out of debt, says Matthew Beatman, bankruptcy lawyer at Zeisler & Zeisler in Bridgeport, Conn.

USA Today tells the story of Irene Froehlich, 61, of Chicago, who works as an independent contractor selling advertising for magazines. Her income dropped 75% at the beginning of 2009, and her credit card debt went up 25%. She depleted her retirement savings trying to make ends meet before filing for bankruptcy this year. The bankruptcy wiped out her credit card debt, but she doesn't see when or how she can retire.

Froehlich is among many people over 55 who thought they had their financial lives in order and have now seen their lives upended.

"My generation thought that we were on easy street," Froehlich told USA Today. "All of a sudden, we have been hit hard."

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Older Americans also face increasing medical debt and declining retirement accounts, as well as unemployment or cuts in income if they remain employed.

Those who find themselves facing serious financial problems should contact a credit counselor at a nonprofit agency, advises Carolyn Rodi of Saving Your American Dream, a nonprofit organization. Experts advise against using retirement savings to prolong the inevitable, because such savings are usually safe from bankruptcy creditors.

"There are a lot of elderly people that are being taken advantage of by bankruptcy attorneys and mortgage brokers who are advising them improperly to pay for the bankruptcy, take out a reverse mortgage or to do things that aren't in their best interest," Rodi told Reuters. "If you have no income, why should you borrow to pay someone when you can get free legal aid?"

John Pottow, a professor at the University of Michigan Law School, released a study in August looking at bankruptcy among people 65 and older. His study, "The Rise in Elder Bankruptcy Filings and the Failure of U.S. Bankruptcy Law" (.pdf file), found that older bankruptcy filers have 50% more credit card debt than younger filers, a median debt of $22,562.

He also found that the older bankruptcy filers were poorer than the younger filers and that many had no retirement savings at all.

More than one-third reported they had gone back to work after retiring, with three-quarters of those saying their motivation was financial. He quoted one person as saying:

It's hard out here at 71 trying to make a living. Hope you don't have to file bankruptcy at 71 and still try to work.

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