Americans are carrying the most consumer debt ever recorded, and no demographic knows this better than the senior citizen community. With seniors being the fastest growing demographic seeking debt relief, we need to understand why and how much better off they are after eliminating debt through bankruptcy.
Those receiving Social Security benefits are living on fixed incomes. For many, their only sources of income are Social Security benefits and part-time jobs, if they can get hired. Pensions and other retirement plans are not as common as in years past. With shrinkflation and inflation, senior are not making ends meet, so they rely on credit to bridge the gap, using credit cards to pay for prescriptions, medical co-pays, groceries, utilities, and assistance. When the credit card payments cut into their ability to pay rent or make house payments, they need to eliminate that debt and start fresh.
Bankruptcy Used to Carry a Negative Stigma in The Past Is Due to False Narratives Pushed by Debt Buyers, Banks, And Other Lenders
Seniors are wising up to the fact that bankruptcy is a business tool, used by millions of businesses with little stigma or negative connotation. As the U.S. Supreme Court has repeatedly held, bankruptcy is for the honest but unfortunate debtor. It is the responsible way to eliminate debt and start fresh. Most people do not know that reestablishing credit after filing for bankruptcy protection normal. In fact, if the consumer otherwise qualifies for an FHA loan to purchase a home, bankruptcy will not prevent the loan approval if it has been 12 – 18 months since the bankruptcy discharge. So, why struggle with debt, especially if you are living on a fixed income?
Some Common Factors That Often Lead to Bankruptcy
1. Rising Healthcare Costs: One of the primary drivers of senior bankruptcy filings is the skyrocketing cost of healthcare. Despite Medicare and Medicaid, seniors often face out-of-pocket expenses for medications, treatments, and long-term care that can rapidly deplete savings. Chronic conditions and the need for extended care can lead to overwhelming medical debt.
2. Insufficient Retirement Savings: Many seniors enter retirement with inadequate savings, a problem exacerbated by stagnating wages and insufficient pension plans during their working years. For those who did not have access to a strong 401(k) or other savings vehicles, or who experienced losses in the financial crisis of 2008, the nest egg they rely on simply isn’t enough to sustain their post-retirement years.
3. Credit Card Debt and Mortgages: Seniors are more likely to carry credit card debt and still have outstanding mortgage payments. Many older adults resort to credit cards to cover daily living expenses, especially if they are on a fixed income that doesn’t meet their needs. With rising interest rates and inflation, this debt can spiral out of control.
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Author: Jenny L. Doling, Esq., LLM Taxation
CA State Bar Certified Bankruptcy Specialist
Secretary and Board of Director of NACBA
President of the San Diego Bankruptcy Forum
Serving Bankruptcy Clients throughout California and
Tax Clients Nationally
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