Bankruptcy Among the Elderly Is On The Rise
Bankruptcy in the United States has undergone a rapid “graying” over the past few decades. In 1991, elders made up 2% of the bankruptcy relief claims; now the share is 12%. Those stark numbers come from a recent Indiana Legal Studies research paper, “Graying of U.S. Bankruptcy: Fallout from Life in a Risk Society,” co-written by professors Deborah Thorne of the University of Idaho, Pamela Foohey of Indiana University Bloomington, Robert M. Lawless of the University of Illinois, and Katherine M. Porter of the University of California, Irvine. The leap in elder filers means about 98,000 families or about 133,000 elders out of 51 million people over 65 file for bankruptcy to get relief from all debt, excluding nondischargeable student debt (which is often incurred by co-signing the student loans of children or grandchildren). In most cases, those filing for bankruptcy come from the lower end of the income ladder. Of elder households that filed for bankruptcy in 2016, 78% made less than median total income. Big impersonal forces are one set of reasons more elders are filing for bankruptcy. In the last 40 years, trade unions have weakened, real wages have stagnated, and good pensions have eroded—trends that catch up with people as they age. Companies have offloaded longevity and pension risk onto employees by eliminating pension plans or switching from defined-benefit plans to less-certain 401(k)-type options. Another force is the rise in medical costs, which has coincided with political decisions to have Medicare pay for a smaller share of elder health care. The longer people live, the higher the medical costs.
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