Seniors Going Broke - New Bankruptcy Study

While we are inundated with TV commercials promoting some illusion of early retirement and traveling in a six figure, gas guzzling RV for months at a time with the grand kids...reality is something completely different.

A new report(pdf) shows the opposite is happening. Americans are filing bankruptcy in droves and the most affected are older people.

Titled Generations of Struggle this study is by the Consumer Bankruptcy Project, sponsored by the AARP. Elizabeth Warren is one of the authors.

 

 

Bankruptcies Rates By Age 1991-2007
Age 1991 2001 2007 % Change
18-24 8.7 5.3 4.2 -51.7
25-34 36.7 26.1 21.9 -40.3
35-44 30.6 33.7 28.1 -8.2
45-54 15.8 23.2 23.5 +48.7
55-64 6.1 7.2 15.3 +150.8
65-74 1.8 3.0 5.0 +177.8
75+ 0.3 1.5 2.0 +566.7

 

As one can see there is a dramatic increase in older people declaring bankruptcy.
Over 1 million people filed bankruptcy in 2007. This is with the arcane new bankruptcy laws, which stop many people from obtaining the much needed debt relief they need.

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Are Seniors Clogging Bankruptcy Courts?

Editorial Column

“Bankruptcy Rising Among Seniors” was the screaming headline in newspapers around the country. The accompanying article quoted a study by Harvard Law Professor and Huffington Post blogger Elizabeth Warren that reports that seniors are rushing to bankruptcy courts in huge numbers because of economic conditions and high healthcare costs.

As director of the 10-year-old grassroots National Active Retirement Association (NARA), a group that carefully studies the boomer and beyond “Age Wave,” I was astounded. Through NARA research, I know that 77 percent of all assets in America are held by those 50+. I also know that 50+ folks on average have higher disposal incomes, savings, pensions and equity than those entering the workforce, young newlyweds and those starting a family.

As NARA is preparing to host regional and national 50+ industry experts at the 9th annual NARA business conference at the Myrtle Beach (SC) Hilton Resort Oct. 1-3 (www.retirementlivingnews.com), I decided to investigate this study a little more.

The main statistic presented was that bankruptcy among citizens aged 75-84 had soared over 400 percent from 1991-2007. The study also referred to huge bankruptcy increases among Baby Boomers, as well. Sounds horrifying, doesn’t it? My initial reaction was our government must do something! What else could possibly pull at the heartstrings of Americans more than the image of the elderly entering bankruptcy court in huge numbers?

But, wait a minute….did the study say the starting point in the survey was 1991? Wasn’t that a time when George H.W. Bush (Dubya’s dad) was president and the late Carroll Campbell was governor? Why send out an emergency alert that alarms people based on a time frame that stretches back three presidents? Could it be that more recent data just didn’t reflect the facts that were presented?

A closer inspection of this AARP-sponsored study did bear out the fact that more recent bankruptcy statistics are actually more favorable than any since 2001, the tail end of the Clinton Years. Based on the study’s actual statistics and an overlay of census data, the following is true:

* Far, far fewer bankruptcies – just a little more than one-half the number - were filed in 2007 than in 2001. In fact, there were over 900,000 fewer bankruptcies in 2007 than in 2001 and almost 200,000 fewer bankruptcies in 2007 than in 1991. All age segments filed fewer bankruptcies in 2007 than in 2001.

* How about the bankruptcies among the 75-84 senior citizen age segment? Those numbers also fell by 8,500 from 2001 to 2007 to just over 20,000 bankruptcies while the number of citizens in this age group rose rapidly. When you look at the number of bankruptcies as a percent of the population, bankruptcies actually fell among these seniors from just under four tenths of one percent in 2001 to about one quarter of one percent in 2007.

* When you look at the 2007 bankruptcy data as a percentage of population, you find that more bankruptcies are being filed among Gen Xers (27-43) and Millenials (26 and younger) than the Baby Boomer and beyond generation, as well as elderly residents. Folks aged 35-44 were the number one age group filing for bankruptcy in 2007. Not too far behind were those aged 25-34.

So, with about 1.1 million (out of a total U.S. population of 300 million) filing for bankruptcy in 2007, just over 54 percent were aged 44 and younger; just under 46 percent were aged 45 and older. So, why would a prominent educator/commentator try to paint a picture that retirees and seniors are all going broke?

Could it be that the study reaches so far back in history to try to create as much gloom and doom as possible from voters before the election to make the case for change?

Hypocritically, AARP, a sponsor of this alarming study, touts in its media materials that the median income of its 34 million 50+ AARP The Magazine readers has increased 16 percent in the past three years. Additionally, the magazine claims its readers gained $663 billion – yes, that’s billion – in total household income in the past three years.

So, which is it? Are boomers and beyond broke or wealthy? Sadly, a certain percentage is like all Americans – having to tighten their belt to non-essential spending. However, at NARA, we know that many retirees have plenty of money to spend and invest. We see states and towns around the South gearing up to attract as many retiree couples from other states as they can get. And, in this challenged economy, more often than not, it’s the buyers with gray hair you’ll see at the closing table.

This is why we are focusing on the tremendous business opportunities that the fast-growing boomer and beyond market is presenting to businesses everyday. It’s a topic that our business members are excited about discussing at our upcoming business conference.
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I'm going to assume

That you are the real Dan Owens and welcome to EP and yes it's ok to mention your business/conference. I almost didn't let this be posted for I thought it was copyright violation until I realized it's your own editorial.

On the study itself, she did note that a flurry of bankruptcies did occur right before the bankruptcy law changed and then there was a lull because so many had filed before the law was changed and then the new law made it so difficult for people to get out of their debt, hence....less actual bankruptcies. I think your observation is valid on this point but on the other hand, is it valid to compare the number of two different laws...the 2nd forcing people to not be able to get out of debt when they probably should be?

In other words, less bankruptcies being allowed by the courts doesn't necessarily imply that's a good thing...for the bankruptcy law itself is horrific in not letting people escape debt who really need relief.

The other criticism I can see on this study is the percentages are still low, in aggregate. Not every senior is going broke, not even close...but the overall dramatic increase, I think is a valid statistic.

I don't think the authors were trying to manipulate an election, seriously, is either party really going to do something to help seniors? ;) But I think they are trying to point out an increasing trend here and I believe the trend lines in showing an increase in senior bankruptcies is valid.

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