First, as the baby boomer generation is now starting to retire, one unfortunate statistic is that the percentage of bankruptcies filed by seniors is increasing. Folks over 65 made up 8.3% of all consumers filing for bankruptcy protection in 2009, when the percentage was 7.8 in 2006. About 10% of the seniors who filed for bankruptcy were retired.
Anecdotally, it would seem that more and more seniors would need to file for bankruptcy protection because the number of pensions is down, balances in retirement accounts are down, rents are up and credit collection agencies are more and more aggressive.
What are the Reasons For Seniors Filing For Bankruptcy?
The number one listed reason is credit card interest and fees just being too high. Illness is second. Income changes are listed as third. Number four is as a result of too-aggressive debt collection actions forcing some to simply give up and file for bankruptcy protection. Housing issues are next, with divorce following that.
In 2010, when a study was undertaken, the ages of all bankruptcy filers was reviewed over a five year period. The percentage of 18 to 24 year olds, who file at the lowest rate overall, went down over that time period. The next lowest, by percentage, was the age group of 65 year olds and older; while they had the second lowest overall rate, their rate of increase over that time period was level, and then up. The next highest percentage of bankruptcy filers, the 55 to 64 year olds, had a very steady increase, from less than 15% to almost 20% of the filers. The percentage of 25 to 34 year olds actually went down dramatically, from just over 20% to about 15%. The 45 to 54 year olds were the next highest bracket, with a steady rate of increase from 25% to about 28%. Finally the 35 to 44 year olds, who had the highest percentage of total filings, went from just less than 30% to about 28%
The statistics for male verses female bankruptcy filers are about even: 47.74 percent male; 52.26% female. This ratio has been relatively constant for about 10 years, with a slight rise in male filings and a slight decrease in female filings, bringing the ratio closer and closer to an even 50/50.
As you can imagine, an increase in education, and thus earning capacity, is strongly correlated in the percentage of total bankruptcy filers. The statistics are changing somewhat in that more filings by those that have more education.
Good News For Seniors in Bankruptcy?
Yes, there is good news for many seniors. Because homes are exempt under the Homestead Act, up to $500,000 can be protected. Many seniors have a significant percentage of their life savings in their home. Be careful, there are important distinctions between the Massachusetts exemptions and the federal exemptions. Seek an experienced bankruptcy attorney’s advice for preparing and filing your bankruptcy petition and schedules.
More good news for seniors? Medical bills can be discharged in bankruptcy.
Even more good news? Most retirement accounts such as IRAs and 401ks are exempt from federal and state bankruptcy.
Finally, Social Security is not included in the Means Test so you can actually have a significantly higher income in bankruptcy as a senior than you can if you were not receiving Social Security.
Get Effective Legal Advice for Bankruptcy
Attorney Neil Burns has been advocating for consumers in bankruptcy since 1985. Call him for a free bankruptcy consultation. 617-227-7423