Bankruptcy options for senior citizens

ARE your “golden years” golden? Not so for more and more Americans age 65 and older. The rate of personal bankruptcy filings among those ages 65 or older soared by 150% from 1991 to 2007, according to AARP. The biggest jump in bankruptcy filings occurred among people aged 75 to 84; their rate skyrocketed 433%.

More than 75% of the seniors surveyed said they went into debt for medical or funeral expenses. “Most people think ‘Oh, I have Medicare — I’m covered,’” said Jean Setzfand, director of financial security at the AARP. “But in fact, there are quite a lot of out-of-pocket expenses — and those continue to rise.”

The biggest one, she said, is long-term care costs. Plus, a lot more people are going into retirement carrying a mortgage. Reverse mortgages and other alternatives presented to them as “solutions” quite often backfire and just dig them further into the hole.

More than half of those surveyed had saved less than $50,000. What’s worse, many of that group said they have saved absolutely nothing. And yet, they retired anyway. Only 4% of those surveyed said they had delayed their retirement due to debt.

The result is that they start living off of their credit cards. Two-thirds of Americans who filed for bankruptcy said credit cards were the key reason for their financial problems, according to a recent study by John Pottow, professor of law at the University of Michigan Law School. “They’re using credit cards as a maladaptive coping mechanism,” Pottow says.

One of the biggest mistakes seniors make when it comes to credit cards is being late with a payment. “That triggers a penalty APR that can exceed 30%, which can trap those seniors who can’t pay their balances in full each month in a downward spiral of debt,” said Ben Woolsey, the director of marketing and consumer research at

If you’re a senior in debt, the good news is that there is a “light at the end of the tunnel.”The law allows you to get out from under the burden of debt by filing for bankruptcy. And since Credit-card debt and medical bills are classified as “unsecured debt,” they would be “discharged” and seniors would not have to pay them.

For example, let’s say your 88 year old aunt never expected to live this long. Not only has she run out of savings, but she has accumulated $25,000 of credit card debt. She has a choice – she may either continue to pay minimal credit cards payments (say $750 per month – that‘s half her income), or file for bankruptcy and use that money for in-home care or costly medications.

What about the stigma of personal failure and shame?  You don’t have to tell anybody. Besides you have a constitutional right to file for bankruptcy. Donald Trump filed on February 17, 2009 and now he’s our president. Other famous people who filed for bankruptcy include Abe Lincoln, Walt Disney, Henry Ford, Jerry Lewis, and Larry King.

What about your credit score? Chances are, for many seniors, you’re thinking of moving to a retirement home, not buying one. Or, your thinking of giving up the keys to the car, not buying a new one. In other words, ruining your credit score shouldn’t be a big concern for most seniors.

Quite often, the adult children don’t find out how much their parents were struggling financially until they pass away. Whatever that parent owes will be deducted from his or her estate before that estate is divided among the children and other beneficiaries. Imagine a scenario where the kids are bickering over who gets mom’s house and, in the end, no one gets it because it had to be sold to pay off mom’s credit-card debt.

Why not have parents file for bankruptcy? Since Social Security and certain retirement accounts are exempt from creditors, he will be allowed to keep his income. In addition, a tremendous burden would be lifted from his shoulders, which could improve his health. He can start enjoying life again – perhaps even join his friends on that next Vegas trip.

In conclusion, if you or a loved one is living with the burden and guilt of carrying a lot of debt, cheer up. By filing for bankruptcy, every dollar you don’t pay to creditors is one more dollar you can use for your everyday expenses. Hopefully, your “Golden Years” will then have a real shot at being just that — golden.

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Elder Law Services of California is proud to announce that attorney Andrew Paranal has joined its trust department.   Mr. Paranal began his career in estate planning in 2013 and has since expanded into asset protection and Medi-Cal planning.  He became interested in Elder Law after helping care for a family member who experienced a debilitating event.  Mr. Paranal is excited to join an established law firm and hopes to educate his Filipino community about the tremendous benefits of proper estate planning.

For more information, please visit or call 1-800-411-0546 

1 Comment
  1. There are a number of inaccuracies in this article. First an 88 year old with retirement income does not have to continue to pay old credit card debt. Her income is protected by federal law. She certainly doesn’t have to file bankruptcy to discontinue making payment on the credit cards like the article states. Why not point out that ss, pensions and other forms of retirement are protected by federal law. A cease and desist letter under the federal Fair Debt Collection Practices Act would stop unwanted collector contact. Shame on any bankruptcy attorney appearing at a first meeting of creditors with a nearly 90 year old widow. Why continue the charade that there is burden when there is isn’t one.

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