Bankruptcies on the Rise Among Baby Boomers
April 12th, 2016 by Bunch & Brock
MC Hammer. Cyndi Lauper. Meat Loaf. Willie Nelson. Marvin Gaye. Toni Braxton. Tom Petty. Mike Tyson. Kim Basinger. These unique personalities are talented musicians who also share the distinction of being Baby Boomers that have filed for bankruptcy protection. And they are being joined daily by many less famous people of their generation. While the amount of debt owed is often significantly less than the millions owed by these celebrities, bankruptcy filings are rising for those born between 1946 and 1964.
Now between 52 and 70 years old, there are about 75 million boomers representing about 29 percent of the U.S. population. While many have retired to enjoy the fruits of their labor, others are finding themselves financially unable to do so. According to a study compiled by a social science analyst and a statistician, boomers are disproportionately represented in bankruptcy proceedings. From 2002 to 2007, the percentage of filers ages 55 to 64 grew 65 percent, while those ages 25 and younger had a 60 percent drop in filings. The researchers traced the trend back to at least 1994, when people between the ages of 55 and 64 accounted for seven percent of all individual filings, yet accounted for 15.2 percent of consumer bankruptcies by 2007.
Some of the fault lies with the housing crisis, when the plunge in house prices left many boomers with little to no equity in their homes. A study by the Center for Economic and Policy Research projected that, of those who own their primary residence, nearly 30 percent of households headed by someone between the ages of 45 and 54 and more than 15 percent of households headed by someone between the ages of 55 and 64 would need to bring money to their closing (to cover their mortgage and transactions costs) if they were to sell their home.
Another contributing factor to the high number of boomer bankruptcies is the cost of healthcare. Rising drug prices, in particular, are a heavy burden for those who require several medications. For those who suffer from serious illnesses, financial abuse in long-term healthcare facilities has become more common. Excessive levels of credit card debt are also straining retirees who have a hard time paying off high interest rates on a fixed income. Declines in the stock market have reduced the retirement savings of many boomers who now find themselves unable to be self-supporting. Once unheard of, student debt in later life is now a growing concern.
The February 2016 Household Debt and Credit Report by the New York Fed calculates that the aggregate debt of the average Baby Boomer has risen an unbelievable 169 percent in the past 12 years. The report also estimates that the average 65-year-old borrower has 47 percent more mortgage debt and 29 percent more auto debt than 65-year-olds had in 2003.
No matter what your age, if you are contemplating filing bankruptcy or want to know about your alternatives, it is advisable to seek the counsel of a bankruptcy lawyer. The KY bankruptcy attorneys at Bunch & Brock have more than 35 years of experience helping debtors determine the best course of action for their situation. To get started, or if you have any questions about this topic, call us at 859-254-5522. You can also reach us by filling out this online form.