Friday, June 15, 2007

The Aging Bankruptcy Boom

From Consumer Law Updates:

[W]henever I tell anyone my age or older that I am a Bankruptcy lawyer, I get treated to the lecture about how we shouldn’t be letting these 20 and 30 somethings go around charging every toy they want and then filing for bankruptcy. My response is not generally regarded as polite cocktail party small talk.

So, here are a few facts for you. According to a study done at the Administrative Office of the U.S. Courts (and who better to know), Americans over 55 are filing bankruptcy at a far faster rate than the general population. The culprits are mortgage and health care costs. In 1994 only 27% of all bankruptcy filers were over the age of 45. In 2002 that percentage increased to 39%. This is in stark contrast to filers under the age of 25. Only 4% of all American adults under the age of 25 filed for bankruptcy in 2002. That was down from 11% of that age group in 1999. So, the twenty-somethings are filing at less than half the rate that they were in the ’90’s; and the Boomers are filing at basically 1.5 times the rate they were in the ’90’s.

These findings are consistent with what I see in my practice. I have far more senior citizens who racked up their credit card debt in pharmacies then I do people under 35. By the upper 30’s the numbers start to pick up, but I am 42 and in the last year of the Baby Boom. Easily most of my clients are older than I am.

You can see more here.


P M Prescott said...

The news media has been the greatest propaganda machine for the credit card companies to make personal bankruptcy appear bogus, while corporations use bankruptcy to screw their employees out of health coverage and pensions. Real liberal institutions aren't they?

Jacqueline S. Homan said...

It is no surprise that the majority of bankruptcy filers are middle-aged. You get hit with a triple whammy. There's job loss, long and fruitless job searches due to age discrimination in the job market; and just when things couldn't possibly get worse, you are hit with a middle-age related medical malady after your savings - and your unaffordable COBRA - have been exhausted.

Age discrimination in the job market is the primary reason many middle-aged people end up in bankruptcy. In fact, awhile back there was a situation of a 60 year old man in Ohio who "robbed" a bank just so he could go to jail to NOT be homeless while he waited to become social security eligible because he could not get a job that he could physically do, due to age discrimination. He handed the teller a note, then politely handed the money to the guard and sat down and waited for the police. Of course, the judge being such a compassionate conservative, obliged this erstwhile bank robber and sentenced him to three years in prison.

As high and unaffordable as automobile insurance is for drivers under age 25, the price tag for health insurance for those aged 35 and older not covered under an employer group plan, is far more prohibitive. If you have pre-existing conditions, you cannot buy an individual HMO plan because it is unlikely that you can be underwritten. Even if one of the big insureres like Aetna or Blue Cross does insure you at age 35+ with opre-existing conditions, your premiums will be surcharged at 300% - which puts paying for coverage well out of reach for 85% of the American population.

As to the assertion that the 20- somethings and 30-somethings are racking up debt for high ticket items, things are not always as they appear.

For example, the increasing cost - and importance of - a college education has forced most middle class students to graduate in debt. In order to land that job after graduation that will hopefully be enough to live on and repay the student loans, you may have to spend money for certain things in order to get the job that the employer expects you to have to "fit in with the corporate culture". The "cost of getting on the team" so to speak, has outpaced salaries and job opportunities.

In sum, exponentially increased costs for education, housing and health care combined with a shrinking economic pie; the conditions that cause insolvency have increased by leaps and bounds.