Enormous medical debt is the most common reason why more people over the age of 55 file for bankruptcy. While it can be a difficult step, many older Americans overwhelmed with massive debt find it can lead to a more stable financial future.
Medical debt is cited for six out of every 10 bankruptcies for people over 65. A study published by the University of Illinois (UI) says older Americans who file for bankruptcy have simply run out of savings, and many are no longer working full-time, making them more vulnerable to financial hardships.
Bankruptcy filings skyrocket for those 55 and older
The UI study focused on bankruptcy filings for a 25-year period and found disturbing results:
- Bankruptcy declarations for people age 55 to 64 rose 66% from 1991 to 2016
- The percentage of bankruptcy filings for those 65 to 74 soared by 204% from 1991 to 2016
- Nearly 12% of those filing for bankruptcy are now age 65 and older, compared to 2% in 1991
Recovering from bankruptcy
The National Foundation for Credit Counseling says people who file for bankruptcy need to work on increasing savings, by setting a goal of saving 10% to 20% of their income. Experts recommend signing up for a secured credit card, which have no credit checks and the credit line is based on the deposit made when opening the account.
Financial experts say making small purchases using the card and paying off the balance in full each month helps you build a good payment record and will likely allow you to apply for an unsecured credit card after a year or so of on-time payments.
Restoring your credit
Bankruptcy can stay on your credit history for up to 10 years but will have the most significant impact in the first two years after filing. Remember to check your credit report regularly for any errors that could cause further issues.
Credit.org also recommends adding a short statement to your credit report, explaining the circumstances that led to your financial difficulties. An experienced bankruptcy attorney can help you with these and other strategies.
