Credit card debt is something many Americans struggle with, but a new study shows that senior citizens are particularly at risk for crushing debt, so much so that an increasing number are turning to bankruptcy for relief.
According to research done by the University of Michigan Law School, a whopping two-thirds of older Americans say that high credit card debt is a reason behind their choice to file for bankruptcy. In addition, the total credit card debt of senior bankruptcy filers is 50% higher than that of younger people seeking debt relief through bankruptcy.
The median age of bankruptcy filers is climbing rapidly, increasing from 36.5 in 1991 to 43 in 2007. In that same year, 7% of all people filing for bankruptcy were over the age of 65. This is an alarming trend, one that Rodney Tullie, budget and credit counselor at consumer credit group CredAbility says is a growing issue. As the Baby boomer generation reaches retirement age, it's likely that the same factors that are bankrupting today's elderly will force even more Americans to file.
Seniors have escalating medical costs, and often face a loss of income due to the death of a spouse or investments that are now worth less because of the volatility in the stock market. Too many seniors, says Tullie, refinanced their homes during the real estate boom and are now struggling with the same high mortgage payments and diminished home values that bedevil Americans of all ages. As a result, many of today's elderly are making ends meet with credit cards, a plan which leads them into a spiral of increasing monthly expenses and nowhere else to turn for relief.
For seniors with no assets and no income aside from Social Security, disability or other protected forms of payments, Tullie said bankruptcy might not be the best action, although some have turned to this in desperation just to get relief from hounding collection calls. Many seniors don't know their rights under the Fair Debt Collection Practices Act, by which a debtor can send a letter requesting that the creditor no longer contact them. Yes, these people can technically still be sued, but without any assets, there's no way for a creditor to collect, and government benefits (like Social Security) can't be garnished, no matter what a bill collector says.
For those who are approaching retirement or are still in middle age, Tullie has this advice: "What you what to have before you retire is a paid-for house and one or two credit cards with minimal credit card debt. Owning your house free and clear gives you many more options -- like a reverse mortgage -- even if your income drops and your expenses rise as you age. Americans of any age considering bankruptcy should meet with a nonprofit credit counselor and check out this article first to determine their best option.
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