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Mired in Debt, More People 55 and Older Face Bankruptcy

By Victor Hull, www.heraldtribune.com

August 5, 2007

At age 59, a time she would rather have been planning her retirement, Brenda Broadbent filed for bankruptcy.Uninsured and buried by nearly $100,000 in medical bills, she lost her house, her car and any sense of control.

"It was a very dark time in my life," said Broadbent, whose Christmastime 2003 heart attack sent her into a financial tailspin that dashed any thoughts of retiring."I'll be working probably until they put me in a pine box," she added.

Bankruptcies are increasing faster among Americans 55 and over than in any other age group, according to a recent study. And people 65 and over accounted for nearly 5 percent of bankruptcy filings in 2002 -- nearly double the 2.5 percent figure from 1994, the report published in the May issue of the American Bankruptcy Institute Journal found.

More older people are carrying more debt, from mortgages to home equity loans and even credit card bills, than ever before.

Analysts say the trend signals underlying problems with the country's health care, economic and elder care systems and has implications for their heirs.

"If you have older Americans who are spending much of their money and savings for health care and general cost of living, they're not able to pass on that wealth to subsequent generations," said Deborah Thorne, an Ohio University professor who co-wrote a major 2001 study on aging and bankruptcy and is working on another.

"The pessimistic side of me," she added, "says we're going to see a lot more of it."

Broadbent, a former real estate agent, works as a temporary office employee while seeking better-paying jobs.

She believes her age and bankruptcy have stymied the search. Still uninsured, she only continues taking heart medication through prescription drug samples from the doctor.

The emotional scars of bankruptcy have not healed.

"I don't think if I live to be 120 I'll ever be over it," she said.

Senior bankruptcies rising

Consumer bankruptcies are up this year to about 14,500 per week. Based on calculations from the new "Aging and Bankruptcy" study in the American Bankruptcy Institute Journal, as many as 700 of them could be by people 65 or over, and 2,000 of them from those 55 and older.

The bankruptcy journal report concluded that older people make up 14 percent of those filing Chapter 7 and Chapter 13 petitions for debt relief. That is up from 9.6 percent in 1994, a 45.8 percent increase -- higher than for any other age group.

The report, covering 13 million bankruptcy filings nationwide, confirmed a 2001 study called "Young, Old and In Between: Who Files for Bankruptcy." The 2001 research tracked a rise in the total number of older people filing for bankruptcy in the 1990s and a doubling in the rate at which older people filed.

"We've got more people filing at a later time in life," Thorne said. "We've got changes in society. There are structural economic changes that are taking older families down."

Broadbent felt economically secure only a few years ago, buying an older Bradenton house in 2003 and spending several thousand dollars to fix it.

"I was trying to get my ducks in a row" to retire at 65, Broadbent said.

The house included a family room, which she turned into a sewing studio where she and her friends could enjoy quilting.

"Life was great," said Broadbent, who added that she had been healthy for years. "I had tripleA credit. I wasn't behind on anything -- nothing. I had, I thought, my life in order. Then all of a sudden, bam! It went down the tubes."

Quadruple bypass surgery followed the heart attack. After she was discharged, medicines cost her $900 a week. The hospital bill was $80,000, with another $10,000 in charges from doctors.

Unable to work, Broadbent could not satisfy the mortgage, car and utility bills, or the thousands of dollars in charges for house repairs and new furnishings. Impaired by post-surgery memory loss, she could not return to handling real estate transactions, settling for taking part-time work instead.

"My phone rang every six minutes, from 8 in the morning until 9 at night," Broadbent said of the calls from creditors. ""I knew I had to do something."

She filed for bankruptcy in the spring of 2004. Though much of the debt was eliminated over the next few months, she was hardly relieved.

"I was devastated. I didn't want to go out of my house," she said. "I felt the whole world knew. You feel like you've committed a crime. I'm a Christian, and I feel like when I owe somebody money, I ought to pay them. I feel I still owe it, even though the government says it's forgiven."

According to a report by economist and author Robert D. Manning for LendingTree.com, her attitude is common among older people, who consider fiscal conservatism and prudent credit use "emblematic of an honorable personal character."

Sarasota bankruptcy attorney Amy Boohaker, who has represented Broadbent and several other older clients, said they often view bankruptcy "as a moral failing," even though it is usually beyond their control.

"Most of those I talk to are very embarrassed and upset about it," said Boohaker, who has been involved in bankruptcy law for more than 20 years. "They'll try to do anything they can to avoid it."

Their resistance to bankruptcy makes the surge in the older population's bankruptcy filings more striking.

More seniors rely on credit

Reports by the National Consumer Law Center, the nonprofit group Demos, AARP and others have tracked the bankruptcy increase and potential causes in a series of reports.

They have noted that incomes for many older Americans have been largely stagnant -- the median income for older households is less than $25,000 -- while living expenses escalated.

"For many retirees, Social Security and pension income are simply no longer sufficient to meet day-to-day needs," the National Consumer Law Center stated in a July 2006 report. "In rapidly increasing numbers, elders are using credit to pay for necessities like groceries, drugs and urgent house repairs."

The report noted that credit card debt among people 65 and over increased nearly 90 percent, to more than $4,000, from 1992 to 2001. Those from 65 to 69 saw a whopping 217 percent increase, to an average of $5,844 in debt.

Credit is not only easy, it is often required, setting some older people up for problems.

"A (health care) provider these days won't talk to you unless you provide a credit card," said Teresa Sullivan, a sociology professor and researcher at the University of Michigan, who worked with Thorne on the groundbreaking 2001 study. "For emergency rooms, doctors -- the card has become a kind of universal guarantee."

Once they have credit debt, older people find it hard to break out of the cycle of high interest rate payments and fees that can exceed the original debt.

As in Broadbent's case, medical costs are a growing problem for the older population. U.S. Department of Health and Human Services statistics show that older people spent, on average, $3,526 on out-of-pocket health costs in 2002, a 45 percent increase from a decade earlier.

Those 65 and over are typically covered by Medicare, the federal health program. Though they still have out-of-pocket costs, those pale in comparison with the expenses faced by the 6 million-plus who are ages 50 to 64 and are uninsured, according to AARP statistics.

Housing is another drain. The nonprofit group Demos noted that 28.3 percent of older people owed money on their homes in 2000, compared with 20.7 percent in 1990. And a Harvard study found that in 2001, home mortgage debt accounted for 70 percent of the debt for people 65 and over, far more than in the 1980s.

Hard time digging out of debt

Carrying debt is a bigger danger for the older population because they have fewer years to recover and are more likely to be disabled, face age discrimination and confront other problems that preclude working to pay off bills.

Younger people can take second jobs or put more family members to work. "Older people simply don't have that option," Thorne said. "They have no economic cushion they can depend on."

While some older people may spend recklessly and use bankruptcy to escape their debts, researchers said they are the exception.

"I don't think it's because they decided to treat themselves to trips to the Bahamas," Sullivan said of the increased bankruptcies in the older population. "I think it indicates a kind of vulnerability. I think it's worth looking at this and trying to figure out what's going on."

As their parents and grandparents struggle, younger family members will likely feel the repercussions. The National Consumer Law Center said that already, succeeding generations appear to be carrying more mortgage debt into their older years.

Just over 40 percent of households headed by people 55 to 64 had paid off their mortgages in 2001, compared with 54 percent of households the same age in 1989.

Broadbent said she "prayed a lot" to get through her ordeal. And she delved into quilting, selling some and donating dozens of others to a Lakeland children's home.

She has moved into a Bradenton condominium purchased by her daughter and son-in-law and bought a car with the help of family. She lives on a tight budget and ignores near-daily solicitations from credit card companies.

More than once, she has left a job interview certain that she would receive an offer, only to hear nothing.

One prospective employer, she says, asked in a job interview about her "five-year plan."

"I almost laughed in his face," she said. "I should have said, 'To be alive and well.' How do I know what's going to happen five years -- or five minutes -- from now?"


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