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Study Finds Credit Card Debt Cited in Increase in Elderly People Who File Bankruptcy

October 20, 2010

Bankruptcy is unfortunately a common problem across the United States at the moment, and it affects people with diverse income levels. But very few people consider tracking bankruptcies according to the ages of the people filing, so our San Bernardino personal bankruptcy attorneys were interested to see a recent blog post on a study about what drives older Americans to file for bankruptcy. The post came Oct. 14 from Forbes magazine's Taxing Matters blog, and it reported on a study authored by University of Michigan Law School professor John A. E. Pottow. Pottow used data from the Consumer Bankruptcy Project to look at what senior citizens -- defined as people 65 and older -- reported as their reasons for going into bankruptcy. About 66 percent of that group cited credit cards, specifically their interest and fees, compared to 53 percent of younger filers.

In general, older people are more likely to file for bankruptcy, the post said. In 1991, 2.1 percent of bankruptcy filers were over 64 and the median age of filers was 36.5. In 2007, older people were 7 percent of filers and the median age was 43. Pottow's study compared the use of credit cards among bankrupt seniors and their younger counterparts. Senior citizens had a higher median credit card debt at $27,213, versus $15,499 for younger filers. They also had more cards -- 44.8 percent of seniors had five or more credit cards, but only 32.4 percent of younger filers did.

However, the study found, this wasn't because seniors make more foolish spending choices than their children or grandchildren. Rather, they were more reluctant to ask their loved ones for help -- just 35.2 percent of seniors had done this, versus 68.7 percent of younger people. They were also more likely to blame bad loans they had made to others. Older people in bankruptcy had generally started out with less money than younger filers, giving them less flexibility. And the study found that seniors are less sophisticated, or less aggressive, in dealing with creditors -- only 37.8 percent had tried to resolve the problem directly with the credit card companies before bankruptcy, as opposed to 60 percent of younger people.

The post concludes that perhaps this study exposes problems with the economics of retirement, rather than with the marketing of credit cards. As Yorba Linda consumer bankruptcy lawyers, we suspect both explanations are partly true. Retired people live on fixed incomes, and some have a hard time working even when they are physically able. This gives them only a limited amount of flexibility when unexpected financial issues crop up -- especially if they are reluctant to borrow, as the study suggests. However, we believe credit card agreements are structured to take advantage of unsophisticated people in every age group, which the recent credit card reform law only partly addresses. And unfortunately, there are unscrupulous people who take advantage of seniors with shady products like reverse mortgages.

People of any age who are considering a bankruptcy should speak with Howard Law PC as soon as possible. Based in Anaheim, we offer bankruptcy help and related legal services for people throughout California. Filing for bankruptcy is not an easy decision, but it can be the right decision for people who know they cannot pay back their debts within a reasonable amount of time. Rather than struggle under mountains of debt for years, such people should consider the difficult but rewarding choice of discharging their debts through bankruptcy and starting fresh. Because bankruptcy comes with an automatic stay on calls from creditors, our Escondido consumer bankruptcy attorneys can stop the harassment as soon as your bankruptcy is filed. If it doesn't stop, we are more than happy to help you sue the creditor to drive the point home. We stand by our clients throughout the process, from the free initial consultation to the day their debts are fully discharged.

If you feel like you're drowning in debt, don't hesitate to call Howard Law to learn more about our services. You can tell us your story at a free, confidential case evaluation at no further risk or obligation. To learn more, contact us online or call 1-800-872-5925 toll-free.