More Older Americans Are Filing for Bankruptcy
According to a new study reported in the Wall Street Journal, more Americans over age 65 are filing for bankruptcy than at any other time before. In fact, the rate of seniors filing for bankruptcy has more than tripled since 1991—a staggering fact.
If you are considering bankruptcy as a senior, there are things you should consider. Reach out to a South Florida bankruptcy attorney to discuss your options.
Financial Insecurity to Blame
According to the authors of the study, so many elderly Americans are filing for bankruptcy because of the increased financial insecurity Americans face. For example, far fewer seniors have defined-benefit pensions, instead relying on 401k or IRAs for retirement income. These investment vehicles do not guarantee income but instead are vulnerable to swings in the market.
Also, incomes have not grown for seniors over the past decades. Instead, the full retirement age has continued to creep up—to 67 for retirees born in 1960 or after. This means seniors have fewer resources to handle burgeoning debt loads.
Massive Amounts of Debt
As reported in the study, the median debt for a senior filing for bankruptcy protection is $101,600, which is about 300% of the median income for all filers. Seniors who file also report a negative net worth, which makes filing for bankruptcy almost unavoidable.
How many seniors are filing? According to the collected statistics, the numbers have increased dramatically:
- Those aged 65-74 filed at a rate of 3.6 for every 1,000, a considerable increase from the rate in 1991 of 1.2 per 1,000.
- Those aged 75 and older filed at a rate of 1.3 per 1,000 individuals. This is also a dramatic increase from a rate of 0.3 per 1,000 in 1991.
The percentage of filers who are elderly has also skyrocketed. In 1991, only 2.1% of those who filed for bankruptcy protection were 65 or older. Today, 12.2% of all filers are seniors.
Bankruptcy Considerations for Seniors
Consumers typically file one of two bankruptcies—a Chapter 7 or a Chapter 13. They have key differences that could impact seniors:
- In a Chapter 7, a trustee can sell your non-exempt property. Helpfully, Florida has a very generous homestead exemption that allows you to exempt the full value of your home if you have been living in Florida for a certain amount of time. However, you might have other real estate you could lose, in which case you might want to file Chapter 13.
- Social Security and Social Security Disability benefits are exempt, so creditors cannot seize those.
- You must pass a means test to qualify for Chapter 7. The easiest way is to have an income below the median for a family of your size in Florida. Neither Social Security nor Social Security Disability benefits are included in the means test. However, in a Chapter 13, these benefits are included when determining how much you need to pay creditors as part of your repayment plan.
You should also discuss how retirement benefits will be treated in bankruptcy. For example, most are exempt, but they can lose their exempt status when withdrawn.
In Financial Distress? Call Nowack & Olson Today
The elderly face many stresses, and financial distress should be avoided if at all possible. Fortunately, a bankruptcy might lift a heavy load from your shoulders. To learn more, speak with a South Florida bankruptcy attorney at Nowack & Olson today.