Bankruptcy Filings Soar For Senior Citizens

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  1. Bankruptcy filings soar for seniors
    By Cynthia Hubert

    Published 12:00 am PDT Sunday, September 7, 2008
    Story appeared in OUR REGION section, Page B1

    No one, Placerville lawyer John Roberts insists, wants to raise the white flag of personal bankruptcy.

    For the young and strong, wiping out suffocating debt can offer a fresh start, but for seniors on fixed incomes, it can signal a lower standard of living.

    "The impact on them is far worse," said Roberts. "Their health is declining. Their options for earning income in the future has narrowed. They are in a very vulnerable situation."

    Across the country, older people are showing up in huge numbers in the offices of bankruptcy attorneys like Roberts.

    A recent study by university researchers shows that, between 1991 and 2007, the rate of bankruptcy filings more than doubled among Americans age 65 and older. The filing rate per thousand people between 55 and 64 was up 40 percent. Among those 65 to 74, it jumped 125 percent.

    The trend appears to be continuing in 2008, and the problem may be far worse than the numbers reflect, said Harvard law professor Elizabeth Warren, one of three researchers who conducted the study as part of AARP's Consumer Bankruptcy Project.

    "Many older people who need to file bankruptcy don't do it because they simply cannot bear the shame," Warren said. "It is humiliating to make a public declaration that you can't pay your bills. But for older people, it can be devastating."

    That debt, she says, does not necessarily reflect rampant consumerism or a life of luxury. Rather, she said, many older people are being pushed toward bankruptcy because of illness or unplanned medical costs. Roberts agreed.

    "They're living on fixed incomes, and expenses have risen to the point that they just aren't keeping up," Roberts said. "When something drastic happens, there's no cushion."

    Several Sacramento area senior citizens who recently filed bankruptcy declined through their lawyers to talk to The Bee about their situations, citing embarrassment.

    "The first thing out of their mouths is, 'I never thought I would be in this position,' " said Sacramento bankruptcy attorney Stephen Koonce. "They're ashamed, humiliated, angry with themselves. They can't believe that this has happened to them."

    Bankruptcy filings are soaring among all age groups. In the Eastern District of California, which includes Sacramento, Modesto and Fresno counties, they have jumped 85 percent during the past year, records show.

    "I'm overwhelmed," said Sacramento bankruptcy attorney Barry Spitzer. "For the first time ever, I'm wondering how I'm going to be able to keep up.

    "I don't track ages of my clients, but plenty of older people are going through this, too. They are no different from anyone else."

    Roberts estimated that perhaps 25 percent of his clients today are senior citizens.

    The national study shows that while most bankruptcy filers are in their 30s and 40s, the financial landscape for younger and older Americans has changed dramatically during the past two decades.

    In 2007, people 55 and older made up 22 percent of all filers, compared to 8 percent in 1991. While they make up only a small percentage of all filers, Americans 75 and older were the age group with the highest jump in bankruptcies between 1991 and 2007, the research shows. During that same period, the proportion of bankruptcies among people 35 and younger actually decreased, from 45 percent to 26 percent of all debtors.

    Younger people may be juggling debt longer, Warren said, before taking the extreme step of filing for bankruptcy. As they grow older, many of them may find themselves buried in bills they cannot pay.

    "Our culture has normalized debt," Warren said. People in their retirement years today "are realizing how difficult it can be to manage that debt as they age."

    Like people of all ages, Roberts added, some seniors also are falling prey to real estate scams that have drained their finances.

    "They get talked into refinancing their houses or buying up," using adjustable rate loans that suddenly "blow up" and suck their bank accounts dry, he said.

    In addition, said Koonce, some older people who racked up credit card debts in their working years are paying the price today.

    "I had a client in his 70s who had built up maybe $20,000 in credit card debt and was making all of his minimum payments," Koonce said. "He missed one payment by a couple of days, and suddenly his interest rates quadrupled. He was at the edge of the cliff, and the credit card companies pushed him off."