You hear it on the campaign trail; the economy is issue number one. People talk of soaring gas prices, rising food costs, the unemployment rate and the mortgage meltdown. What has not been openly discussed is the sharp rise in the number of seniors filing for bankruptcy. According to a report issued by AARP, “Generations of Struggle” the rate of personal bankruptcy filings for seniors ages 75 to 84 jumped 433.3% since 1991. For the first 6 months of this year bankruptcy courts are seeing almost a 20% increase as people struggle in this weakening economy. David Reville, Director of Communications for AARP in Vermont, is concerned that the high cost of heating fuel this winter will “bust the budget” for many seniors on fixed incomes and for struggling families around Vermont.
For many seniors their economic security can vanish with one illness. The rising cost of health care and prescription drugs can financially devastate seniors on a fixed income. According to Reville “older people are using credit cards to pay for medicines and doctor’s bills and are getting themselves into a hole they can’t get out of. People do not anticipate getting sick which throws a wrench in the family budget.”
According to the AARP report for the first time we are seeing many seniors retire who still have debt. Many seniors are still paying mortgages and have credit card debt which is something that was not seen in previous generations. According to Reville there is a “startling lack of savings in this country right now.” Many seniors are cashing our equity in their homes to pay the bills or to help their children and grandchildren in these tough economic times.
According to Reville the average credit card debt for people 60 and older has increased 194%. Reville acknowledges that “in these tough economic times seniors are cashing out the equity in the homes to pay for everyday expenses and turning to credit cards in greater numbers.”
According to Thomas Mackell author of “When Good Pensions Go Away” and chairman of the board of directors of the Federal Reserve Bank in Richmond the current trend of seniors filing for bankruptcy is “a horror story in the making. It will not get better. It will continue to get worse. We are facing a generation of baby boomers where 55 percent of them are ill-prepared economically to retire.” According to Elizabeth Warren, a professor at Harvard Law School and one of the authors of the AARP study, the combination of fixed incomes and high bills have pushed many seniors to the brink. According to Warren “it’s heartbreaking to see how many people are living right at the margin. If they get sick, or lose a part-time job, they wind up in bankruptcy.”
According to a recent report in “Health Affairs” nearly half of the 1.5 million personal bankruptcies field each year result from health expenses even though over 76% of those filing for bankruptcy were covered by insurance. According to David Himmelstein, an associate professor of medicine at Harvard Medical School who led the study, “almost every American is one step away from potential bankruptcy from serious illness.” The rising out of pocket expenses and gaps in coverage for insurance policies put families at risk of financial ruin resulting from medical expenses.
Seniors and those on fixed incomes are the most vulnerable during economic downturns. For seniors it can be more difficult to find jobs that can supplement their income to combat rising costs Reville advises seniors thinking about filing for bankruptcy contact the Consumer Credit Counseling Service of NH & VT at 800-327-6778 for information about how to resolve debt issues and if bankruptcy is the best course of action.
Sarah Lemnah writes on senior issues for the Champlain Valley Agency on Aging. This article originally appeared in the Burlington Free Press.
