The number of older Americans filing for consumer bankruptcy has never been higher. According to a study by the Consumer Bankruptcy Project, that rate at which Americans 65 and over file for bankruptcy has more than doubled, and there’s been a five-fold increase in the percentage of older adults in the bankruptcy system.

“For an increasing number of older Americans, their golden years are fraught with economic risks, the result of which is often bankruptcy,” according to the report’s authors.

Individuals 65 and over reported filing for bankruptcy because of credit card interest rates and fees, medical problems, a decline in income, and aggressive debt collection practices. Nearly seven out of ten respondents “very much” or “somewhat” agreed that financial struggles, namely a decline in income, was the reason for their bankruptcies, and senior citizens are increasingly exposed to these kinds of risks.

Four reasons seniors file for bankruptcy

Medical issues

One of the leading strains on finances of older Americans is healthcare. In addition to increased medical visits and treatments, many senior citizens also require costly prescription medications.

While seniors often have health insurance through Medicaid, Medicare, or a private insurer, they may still incur out-of-pocket expenses. The National Bureau of Economic Research found that medical spending more than doubles between ages 70 and 90.

The increase in healthcare costs can become unmanageable. According to a report in the Journal of General Internal Medicine, Medicare-eligible households spent at least $10,000 out of pocket on healthcare in their last five years alive, and one in four participants spent more than their total household assets on healthcare.

Unfortunately, costs of medical care are projected to rise. It is forecasted that a typical senior citizen will spend one out of every seven dollars of retirement income on medical care by 2035.

Fixed incomes

Most people hope to retire at some point in their lives. For workers in particularly grueling professions involving manual labor, increased age can affect their performance and ability to do a job adequately.

While senior citizens are eligible to receive Social Security benefits, which helps supplement existing income, the CBP found that benefits only replaced about 40 percent of preretirement income for the average worker during the 1980s and 1990s.

Older adults who are able to maintain part-time jobs are still forced to deal with cost-of-living increases. For many senior citizens, it quickly becomes difficult to pay larger bills with an income that remains the same.

Credit card interest rates and fees

senior with an empty walletAs senior citizens struggle to keep up with monthly bills, one of the areas that is likely to become a serious concern is the balance on credit cards. The CBP study found that 61.3 percent of households headed by someone 60 or older had some debt, and the median amount they owed was $40,900 in 2013 after being only $18,385 in 2001.

Already financially limited, many older Americans simply opt to make minimum payments on their credit card bills. As this becomes a habit, the senior is more likely to end up owing significant amounts in interest. Worse yet, some seniors are unable to avoid adding to these past-due balances by using credit cards to pay for prescriptions, meals, or other costs of living.

Scams targeting senior citizens

Another unfortunate reason that senior citizens find themselves in financial trouble is that they often become victims of fraud. According to the National Council on Aging, the ten most common financial scams targeting seniors are:

  • Medicare/health insurance scams
  • Counterfeit prescription drugs
  • Funeral and cemetery scams
  • Fraudulent anti-aging products
  • Telemarketing/phone scams
  • Internet fraud
  • Investment schemes
  • Homeowner or reverse mortgage scams
  • Sweepstakes and lottery scams
  • The grandparent scam (person acts as a grandchild to seek money from the supposed grandparent)

Filing for bankruptcy

Senior citizens usually have options to help them with whatever financial difficulties they might be facing.

Bankruptcy does offer advantages for older people in some circumstances. For example, Social Security benefits and tax-exempt retirement accounts such as 401(k)s are exempt in bankruptcy. In general, the primary benefit of bankruptcy is the immediate discharge of medical and credit card bills. Many seniors have complicating issues relating to the equity they have in their homes or motor vehicles, which may affect whether property can be retained and which chapter of bankruptcy will be filed.

A senior citizen will want to make sure to discuss his or her personal situation with an experienced bankruptcy attorney in order to determine what property or assets could be at risk in a Chapter 7 or Chapter 13 bankruptcy filing.

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