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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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