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More older people filing for bankruptcy

Credit card debt is the top culprit, but that may be the result of unemployment or other financial setbacks, not lavish living.

By Teresa Mears Oct 25, 2010 1:11PM

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

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."

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.

More from MSN Money:

Oct 26, 2010 8:29PM
A lot of the financial problems seniors have is due to  medical expenses.  Many of these people only have a lifetime to prepare for retirement. Too many people live for today and don`t think about tomorrow. Where is it written that you have to pay for your kids college education. Have them go to work and pay there own way. I served in the army 1965-1968. I used my GI bill to pay for my college education. I have a degree in business administration. I am retired US Civil Service.

Oct 26, 2010 3:41AM
Although the decision to invade Iraq or continue such large military operations for so long is questionable... I'm not sure it has much to do with this story. Thankfully the current Government is withdrawing troops and realizes that we need to move on when possible. The big problem with seniors having financial problems really goes back to the elimination of pensions. This study was through 2007 so it has nothing to do with the current recession. How do we replace the pension that other generations have relied on? This is a tough one. It really isn't the job of Government -- corporations have abandoned any responsibility here. Offering a couple thousand in a 401k match (if any) is not a sufficient replacement for the pension. Meanwhile the fat cats are making more than ever and companies profits have soared over the years. Tax dollars can't cover this and shouldn't. Companies need to rethink the system. However, they won't until forced by legislation which nobody likes. 
Oct 25, 2010 7:27PM
why not, the whole country is bankrupt, and may go further downhill, if we continue to send our jobs overseas, and finance wars that we cannot win.
Oct 26, 2010 5:44PM

The very low interest rates on savings is also causing a lot of older Americans to deplete their savings.  When I retired you could get 4-5% to supplement social security.  Now it is next to nothing.  This depletes the principal in a big hurry.

save lots more and spend much less.....

This means less Cable TV, less Steak, less overeating....let little Johnny (grandchild) drink coffee at home instead of a $5 Mocha Latte, Low Fat at Starbucks.

What it DOES mean is more rice and beans, watch your weight to hold your health risks down, etc. as people like Dave Ramsey and Kotlikoff suggest.


Oct 29, 2010 2:13PM

Not Old Fashioned, I'm sorry to tell you this but you have a tough road ahead of you.  Your problems are just starting and will do nothing but get worse unless you change your life drastically.  Let me offer you some desperately needed advice. 


Quickly get rid of your leased cars.  They are, by far, the most expensive way to pay for a car.  Share a car between you and your husband, and make sure it costs no more than $3K. 


Stop paying your kids' student loans, if you are.  You can't afford it!!!


Do not repair anything on your house that is not ABSOLUTELY necessary--better looking wood floors don't count. 


Take as many jobs as you can find and don't complain about the higher taxes.  You are taxed progressively (first $15K @ 10%, etc.), so only your extra income is taxed at a higher rate.


Pay off your credit cards fast, but don't touch your retirement (IRA, 401k) to do so. 


Your income cannot support your lifestyle, so unless you make changes, it will only get worse.  Whether you take my advice is your call, and, honestly, I could care less what you do.  But it's nearly certain that your future is a poverty-stricken retirement unless you change.  Good luck.




Oct 26, 2010 4:44PM

I am a 62 married retired school counselor.  My husband and I retired about six years thinking that we would be ok.  At the time we had one son starting college and one son graduating.  There was little money to be found in grants and scholarships for our sons as we were at a higher income  for eligibility; consequently, we had to do student loans.  We paid off several credit cards but then the house needed necessary repairs ; flooring,roof..the lease to our cars was up.  We decided to take part time jobs, for a few months if helped; but we put ourselves in a higher tax bracket.  So the money we made had to pay our taxes which was more than before.  At the same time, the credit card companies closed three of our accounts even though we paid the bills on time, the other 3 raised the minimum monthly bill and increased the APR rate as well.  Along comes new health problems and additional medicines we have to take. I also need major dental work, but the insurance only covers 1/8 of the bill.

This is why I am very close to bankruptcy, I have never been in this situation in my life and I am very frightened.  I do not know what to do ..if I work I pay more taxes; if I don't I can't pay my bills!

Oct 26, 2010 8:21PM

Re joey6555's post.  Check with your bankruptcy attorney regarding whether retirement accounts can be protected in a bankruptcy.  Most of the time they can,  but I believe it varies by state and the amount in your retirement accounts. 


However,  the time to determine this fact is NOT after you have paid down your credit card debt from your retirment account(s) and depleted them.   You should always consider bankruptcy BEFORE raiding retirement accounts to pay down debt.   At least this way,  you will most likely save your retirement money and have the debt dismissed.  This is one of the reasons FOR bankruptcy filing.


It is also dependent on the TYPE of bankruptcy filed.

Happy Trails.


Oct 26, 2010 6:48PM
Living paycheck to paycheck and all financial woes out there are merely society's influences and society influences you only as long as you belong to it psychologically. Society can have no influence on you whatsoever the moment you cut the psychological ties that bind you to it. Once you are out of it there is creation.
Oct 26, 2010 5:12PM

Never mind, I looked up the answer.

Yes 401k and pensions are protected in a bankruptcy.

So if you are going to go bankrupt do not draw down the 401k. Just go bankrupt and keep the 401k.

Talk to your tax person or lawyer for more advice.

Oct 26, 2010 4:57PM

I maybe wrong but I thought that a 401k/pension was protected in a bankruptcy? In others words you keep the 401k and go bankrupt.

Anyone know?

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