Bankruptcy claims are on the rise. But only for some.
An FKD Feature exclusive

A new report from the Social Science Research Network shows that in the last 25 years, the rate of bankruptcies filed by those over 55 years of age has more than doubled, while the rate for those under 54 is way, way down.

The data

The Consumer Bankruptcy Project released data showing the percentage of Americans filing for bankruptcies by age group.  According to this data, the number of bankruptcies filed by those 55 to 64 is up 66 percent while bankruptcies filed by those aged 25 to 34 is down 64 percent. The really scary statistic is that bankruptcies filed by people 65 to 74 years old is up a whopping 204 percent. The data covers the years 1991 to 2016. In 1991, in the age group 65-74, 1.2 out of every 1,000 people filed for bankruptcy. By 2016, the rate tripled to 3.6 people per 1000.

What does filing for bankruptcy mean?

Bankruptcy is a legal proceeding for people whose debts are greater than their assets. The right to file for bankruptcy is a protected right under the U.S. Constitution. During a bankruptcy, the court examine the assets and liabilities of individuals who can’t pay their bills and decides whether to discharge those debts so they are no longer legally required to pay them.

Under the bankruptcy code there are two kinds of bankruptcy filings: Chapter 13 and Chapter 7. Under chapter 7, there is no repayment plan so the debtor is no longer responsible for repaying debts discharged by the courts. A chapter 7 bankruptcy stays on your record for 10 years. A chapter 13 bankruptcy includes a repayment plan and is sometimes called a “reorganization bankruptcy” because some portion of the debts have to be repaid.  A chapter 13 bankruptcy stays on your record for seven years.

What does the data on bankruptcy filings mean?

According to the Social Science Research Network: for those 55 and older, “the risks associated with aging, reduced income and increased health care costs, have been offloaded onto older individuals.” Some of these risks include disappearing pensions and the fact that a person has to reach a higher age in order to receive full Social Security benefits. The same reports tells us that “the social safety net for older Americans is shrinking.”

Takeaway

The burden is clearly off of the millennials’ shoulders for now, but this does not mean there is a great cause to celebrate. After all, it may be millennials with the same issues 30 years from now. Millennials are not dependent upon the Social Security net yet, but one day that will change. And the net might not be there for them either.

 

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Posted 11.06.2018 - 09:00 am EST