Bankruptcy among seniors a real concern

GARY HABER

Bankruptcy filings among people 55 and older have risen sharply, as older Americans struggled with higher medical bills and stagnant incomes, according to an AARP study released Tuesday.

In 1991, people 55 and over represented just 8.2 percent of bankruptcy filers, according to the analysis by researchers at Harvard Law School, the University of Michigan and Ohio University.

That figure jumped to 22.3 percent by 2007, with the fastest increases among people 75 and older (up 566.7 percent) and those ages 65 to 74 (a 177.8 percent increase), the study found. Filings rose 150.8 percent among those between the ages of 55 and 64.

The report, which analyzed data from 2,400 debtors in Pennsylvania, California, Illinois, Tennessee and Texas, shows that for many, the retirement years will be a time of increasing financial unease.

"This is a cause for concern," Susan Reinhard, senior vice president of AARP's Public Policy Institute said in a press release. "It indicates that financial security is progressively eroding for many older Americans."

Vivian Houghton, a bankruptcy lawyer, who has her own firm in Wilmington, has noticed an increase in the number of people in their 50s and older seeking her services.

"What's breaking their backs is the cost of living, especially the cost of health care," Houghton said.

Houghton said some of her elderly clients had to use credit cards to pay for medications not covered by Medicare, the federal health insurance program for the elderly. The credit card bills kept mounting at the same time as the cost of gas, food and utilities also have skyrocketed, she said.

At the same time, many older people are at a disadvantage because they have a hard time finding a job to supplement their income, said Erin Brignola, a bankruptcy lawyer with the firm of Cooper Levenson in Bear.

Brignola, too, has noticed more people age 55 and older coming to her to file for bankruptcy.

The combination of fixed incomes and higher bills has pushed many seniors to the brink financially, says Elizabeth Warren, a professor at Harvard Law School and one of the study's authors.

Thanks to mortgages and medical bills, many people are entering their retirement years with more debt than previous generations, Warren said.

"It's heartbreaking to see how many people are living right at the margin.," Warren said. "If they get sick, or lose a part-time job, they wind up in bankruptcy."

The 2007 statistics are based on a national sample that included 2,435 responses from bankruptcy filers. It's the first in several Consumer Bankruptcy Project reports supported by AARP, which will later study and spell out the individual factors behind the increase.

For the elderly, bankruptcy is a particular concern because it's typically harder for seniors, usually lacking in well-paying job opportunities, to climb back out of it.

"They have so little time to start over and build up savings, and they have few or no job opportunities," Reinhard said. "The connection between health and economic security is a big issue for older Americans."