Older Americans’ Rising Bankruptcy Filings

Older Americans (age 65 and over) are increasingly likely to file bankruptcy and now comprise a larger proportion of the people who file bankruptcy -- and the effects are not small. Using data from the Consumer Bankruptcy Project, in a new working paper just posted to SSRN -- Graying of U.S. Bankruptcy: Fallout from Life in a Risk Society -- my co-authors (past Slipster Debb Thorne, Slipster Bob Lawless, and past Slipster Katie Porter) and I find a more than two-fold increase between 1991 and now in the rate at which older Americans file bankruptcy. We further find an almost five-fold increase in the percentage of older persons in the bankruptcy system. The magnitude of growth in older Americans in bankruptcy is so large that the broader trend of an aging U.S. population can explain only a small portion of the effect.

In the paper, we link older Americans’ increased filing rates with the shrinking social safety net. A story published today in the New York Times (on actual paper and on the front page!) does an exceptional job of both describing our study and detailing the ways in which the risks of aging have been off-loaded onto older Americans: “vanishing pensions, soaring medical expenses, inadequate savings.” The story also highlights the financial and life travails of a few older Americans who filed bankruptcy. Their struggles stem from declining income, lost insurance, and unmanageable medical expenses.   

As we detail in the paper, our data likewise show that older Americans are struggling with inadequate income and unmanageable healthcare costs. By the time they file bankruptcy, the median older American enters the system with negative wealth of $17,390, as compared to more than $250,000 for their non-bankrupt peers. This means that for an increasing number of older Americans, their golden years are fraught with economic risks, the result of which is often bankruptcy. And for those older Americans who file bankruptcy, given their age, they most likely do not have enough years to get back on their feet post-discharge. As we write, for them, “bankruptcy is too little too late.”   

We all express many thanks to the NYT reporter, Tara Siegel Bernard, who spent a lot of time slogging through our study and identifying a few older Americans who filed bankruptcy to put faces to our findings.