Older local residents increasingly turning to bankruptcy
Mike Tony | Herald-Standard
Dan White, a partner at Zebley, Mehalov & White law office, has noticed an uptick in local older residents turning to bankruptcy after having to support their children and grandchildren. White noted that some older clients have had to move in with their children due to financial struggles as well.
Mike Tony | Herald-Standard
Dan White, a partner at Zebley, Mehalov & White law office, said that older residents are very reluctant to file for bankruptcy, more so than younger clients. But a recent report from the Consumer Bankruptcy Project found that older Americans are increasingly turning to bankruptcy as their financial plight grows.
Boatman
What should have been their golden years became a downward spiral into the red instead.
So older local residents are turning to bankruptcy as a last resort amid rising costs of living and a greater frequency of still having to support an extended family even at an advanced age, Dan White has noticed.
A partner at Zebley, Mehalov & White law office in Uniontown, White has observed older residents who have struggled to stretch out their fixed incomes enough to cover themselves, and their families file for bankruptcy, looking to avoid repossessions, foreclosures and other calamities.
“It just seems that the Social Security income doesn’t go as far as it once did,” White said, estimating that at least 15 percent of his firm’s bankruptcy filings come from clients who are 65 and older.
A report released by the Consumer Bankruptcy Project earlier this month gives a similar estimate nationwide — and notes that that figure has skyrocketed in recent years.
The report found that one in seven bankruptcy filers is of retirement age, 65 years or over, nearly a five-fold increase over two and a half decades.
But the decisive uptick isn’t just from growth in the share of people 65 and over, as the report notes that that group’s share of the population increased just 2.3 percent from 1991 to 2015.
“The broader trend of an aging U.S. population can explain only a small portion of what is happening in the bankruptcy courts,” the report states.
Locally, White has noticed a trend going back a decade or so that goes beyond the data: older residents supporting their adult children and their extended families.
“A fixed income might be enough for one or two, husband and wife,” White said. “But when you add children and grandchildren onto that, it doesn’t go as far as it needs to go.”
Medicare coverage is not enough for many local older individuals, White has noticed.
“Even if it (covers) 80 to 90 percent of a large number, it’s still beyond what people can afford,” White said.
Gary Boatman, certified financial planner at Boatman Wealth Management in Monessen, said that a lot of workers were forced to retire five to 10 years earlier than they planned amid the 2008 financial crisis.
“Most people had a pension (in the past),” Boatman said “Not anymore. Now most have Social Security.”
There were 4.71 non-business bankruptcies filed per day on average across Fayette, Greene, Washington and Westmoreland counties combined during a 12-month period ending June 30, 2018, according to bankruptcy statistics from the Administrative Office of the U.S. Courts, adding up to 1,720 filings in total.
The Administrative Office of the U.S. Courts does not collect data on the ages of those who file bankruptcy.
The Consumer Bankruptcy Project study reviewed 3,200 bankruptcy cases combined with 910 completed questionnaires.
More than half of older filers who responded indicated that the single-most important thing they had to go forego amid their financial plight was medical care, including surgeries, doctor visits and prescriptions.
More than six out of 10 older debtors who responded struggled for at least two years to repay their debts before they turned to bankruptcy for help, according to the report.
“The obvious takeaway is that the financial stability of older Americans, bankrupt and otherwise, has deteriorated,” the report states.
Older individuals are very reluctant to come in and talk about their financial struggles and bankruptcy outlook, White said, contrasting them with younger clients, who he said don’t have as much of a problem filing.
“They always think of this as a failure,” White said of older clients considering bankruptcy.
It’s not a panacea either, the report notes, alluding to a 2006 study that found that older debtors are more likely to experience continuing financial difficulty even after filing for bankruptcy.
“Realistically, when older Americans file bankruptcy, they are most likely to experience a long-term, probably permanent second-class economic status,” the report states.
White said that bankruptcy helps older individuals with short-term financial problems, sometimes helping them stay in their homes or hang onto other assets.
Boatman said many seniors are “heavy” on the stock market, which has been a bullish market for years now.
“At some point, there’s going to be a correction,” Boatman warned.
The Consumer Bankruptcy Project report posits that the most effective solution to older Americans’ increasing financial stress is a greater social safety net.
“At the core, the lessons of prior decades show that aid to older citizens must originate with our government,” the report states. “Community and charitable organizations, while having the best of intentions, are inadequate.”
If current bankruptcy trends among seniors continue, the report warns, the nation’s bankruptcy courts will be flooded with “financially broken” retirees.
Boatman recommends determining what you can afford and adhering to a well-considered budget before retirement.
“It’s amazing how many people go into retirement with a lot of debt,” Boatman said.