A new age of debt

A new age of debt

CHAMPAIGN — In 1991, just 1.5 bankruptcies per 1,000 in America were filed by those 65 and older.

Twenty five years later, that number has quadrupled, according to University of Illinois law Professor Robert Lawless, based on preliminary data from the Consumer Bankruptcy Project.

"Previous studies that came out of Consumer Bankruptcy Project showed an increasing trend of people over 65 filing for bankruptcy," Lawless said. "The trend has continued and indeed picked up."

The bankruptcy filings are a symptom of the underlying debt problem, Lawless said.

"People should be entering their retirement years with savings and retirement funds, not a bankruptcy," Lawless said. "But the evidence is piling up that more and more Americans are entering retirement financially insecure, and that's the problem."

The CBP's bankruptcy findings come from a nationally random sample, so local numbers aren't available. However, local bankruptcy lawyers say they see a significant number of bankruptcies filed by the elderly.

Local attorney Brett Kepley said he doesn't know whether the number of senior citizens filing for bankruptcy has increased, but estimated the current percentage of elderly bankruptcies he sees at about 10 to 15 percent.

The causes of bankruptcy vary, and Lawless said more research is needed on why seniors are piling up more debt.

"There's not a lot of research on this, and there needs to be more," Lawless said.

That being said, he suggested larger socioeconomic trends are playing a role.

"We're seeing a shift in the ability of people who are in young adulthood to manage their own affairs," Lawless said. "I think that's a big part of the story of the financial problems of elder Americans."

For example, the New York Times reported Thursday, based on data from the Institute of Social Research at the University of Michigan, that "40 percent of 22-, 23- and 24-year-olds receive some financial assistance from their parents for living expenses."

Additionally, older Americans increasingly have student loan debt, usually to help pay for the child's or grandchild's education. According to a recent Consumer Financial Protection Bureau report,

"The number of consumers age 60 and older with student loan debt has quadrupled over the last decade in the United States, and the average amount they owe has also dramatically increased."

While student loan debt typically can't be discharged in a bankruptcy, the student loans can lead to financial problems in other areas that may lead to bankruptcy.

"I do have an increase in the number of clients with the problem of student loans hanging out there," Kepley said. "By filing for bankruptcy, it eliminates other creditors so they can focus only on the student loans."

Local attorney Kevin Schneider has seen seniors file for bankruptcy for a variety of reasons.

"There's a decent chunk that are medical bills. I've seen some where it's a loss of work or early retirement," he said. "The death of a spouse can change their income to where they just can't pay the bills."

UI law Professor Matthew Andres runs the Elder Financial Justice Clinic, which provides free legal representation for victims of financial abuse. Andres said the elderly can often be more easily taken advantage of financially, which can lead to debt and bankruptcy.

"I don't know have any statistics with regards to bankruptcy, but financial exploitation is a big reason for bankruptcies among seniors," he said.

"We've had people come to us in situations where their grandson or niece or nephew convinced them to sign on to a car loan, for example, and then the son or grandson doesn't pay and they're left holding the tag, and bankruptcy can be the best option at that point."

Over the years, Schneider said, there is less of a stigma attached with filing for bankruptcy than there used to be and suggested that could be part of the reason bankruptcies have increased.

"It doesn't necessarily reflect on their character," he said. "The problem is further up the chain. I think that bankruptcy is a good thing because it frees up a lot of accounting room. Seniors becoming impoverished and overwhelmed with debt is bad."

Sections (2):News, Business
Topics (1):Economy

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