Irene Froehlich, 61, dutifully paid her credit card bills on time, even after her commission-only income fell by 75 percent two years ago. But when the credit card companies raised her interest rates, says the Chicago resident, she was backed into a financial corner. She filed for bankruptcy in November 2009.
The recession that drove these two people to the edge is helping drive a larger trend: a rising rate of bankruptcy filings by older Americans. Historically, soaring medical debt was the main reason older adults took this extreme step.
These days, the rate is pushed up increasingly by lost or reduced income, a weak labor market and depleted retirement accounts.
In a sign of the times, the number of personal bankruptcy filings by people of all ages rose to 1.5 million in 2010, the highest level since 2005, when the law was revised to make it harder to wipe out debt, according to the American Bankruptcy Institute.
The Institute for Financial Literacy (IFL), based in Portland, Maine, did an age breakdown of the data for 2009, when 1.4 million people sought bankruptcy protection (analysts are still processing the 2010 figures). The study found that older people are making up an increasing proportion of the nation’s bankruptcy filers.
People ages 45 to 54 accounted for 27 percent of all filers in 2009; in 2006, when 598,000 people filed for bankruptcy, this age group accounted for 25 percent of the total.
The 55-to-64 age group made up 17 percent of filers in 2009, up from 14 percent in 2006. The 65-and-up group, meanwhile, made up 8.3 percent of all filers in 2009, a rise from 7.8 percent in 2006.
Leslie Linfield, executive director of the IFL, is concerned by numbers like these.
“A young person has the ability to rebuild themselves financially,” Linfield says. “Are seniors afforded that same opportunity by virtue of their age? Are we as a society taking care of our seniors when so many have to seek bankruptcy protection to begin with?”