More seniors are filing bankruptcy

Bankruptcy has helped many people out of financial struggles, giving them the fresh start that only bankruptcy can provide. Is it the way to help rebuild their lives and their credit ratings.

The immediate benefits of eliminating overwhelming debt are obvious and unmistakable but there are also many long term rewards to a discharge in bankruptcy.

As reported in a recent Newsweek article many older adults have turned to bankruptcy in situations where paying creditors makes it impossible to set aside necessary contributions to a retirement plan or where anticipated Social Security or retirement benefits do not leave enough excess income to pay off creditors after paying basic living expenses. In addition, many older adults get in financial trouble trying to help out their sons, daughters and other family members who are also in need.

The U.S. Department of Commerce's National Institute of Aging projects that by 2010, the number of people over the age 60 in the U.S. will be growing at a rate of three and a half times as high as that of the general population. This means that Social Security benefits will likely continue to be cut more and more as time goes on.

Accordingly, those of you approaching retirement age will need to take the important step of setting funds aside to help you get through your retirement years and to eliminate any existing debt that you have, prior to the inevitable decrease in income that comes with retirement.

Even those of you who have carefully planned for your retirement are finding that the recent fall in stock values, the astronomic increase in the cost of necessary healthcare and medications, and the cost of long-term care and nursing have left you far less prepared than you had hoped.

Whatever the reason, Bankruptcy can be an indispensable tool to help deal with financial planning gone astray.

The number of people over 65 who file for bankruptcy has tripled in the past 10 years. One obvious reason for this is that most retired adults experience a decline in income along with an increase in expenses, such as health care and housing. Research has shown that Social Security is the main source of income for the average older Chapter 7 debtor. For these people, credit card debt was the most common type of debt discharged. One suggested reason for the increase of credit card debt in the hands of older adults is the fact that credit cards can now be used for payment for medical prescriptions and physician co-payments. Exacerbating the problem is the deregulation of usury laws in most States, permitting creditors to charge higher and higher interest rates, along with aggressive marketing programs directed toward seniors and increasing levels of credit extended.

This has caused a problem for retirees who are unable keep up with the interest compounding on the balances charged. In its series of papers examining the economic security of different populations, a number of solutions have been suggested to deal with the problem of seniors and their ever increasing financial challenges. Among the suggestions are: (1) Increased regulation of lenders' practices, and (2) Prevention of Congress' proposed legislation, which is aimed at inhibiting the ability for many people, including seniors, to file bankruptcy.

In the meantime, unfortunately, bankruptcy has become a necessary tool in dealing with the debt load experienced by many older Americans.