A recent report finds that the number of seniors aged 61 to 74 filing for bankruptcy has tripled over the last several years. The report states that this is a dangerous trend and that the rising costs of healthcare play a significant role in the bankruptcy uptick.

These statistics may also be suggesting a greater trend of senior financial instability. While most seniors have not filed for bankruptcy and are not on the verge of bankruptcy, there are worries about financial security during the golden years.

Alternatively, these statistics may be painting an entirely different picture. Perhaps it is not all doom and gloom for seniors and these statistics have a different meaning.

The Honest Debtor

United States Bankruptcy law, which is governed by the United States Bankruptcy Code, or the Code, only provides bankruptcy protection to the “honest” debtor. That is to say, someone who runs up debt with the intent of discharging that debt via bankruptcy is not entitled to a discharge. The Code provides items that are “badges of fraud,” which are tools used to determine whether a debtor committed fraud. One aspect of fraud, in a bankruptcy sense, is not being “honest” with respect to why debt was created. This type of bankruptcy filing is called “abuse” and is not tolerated under the Code.

Seniors in Debt

Seniors, in theory, should have financial ground where they can collect pension and social security benefits. With that income, they can live their lives without concern for generating income. Seniors, when retired, often take up hobbies like golf, painting, and horseback riding. Seniors often relocate to San Diego, Phoenix, and Florida to take advantage of the warm weather or they relocate to areas where they can downsize and be closer to family.

This is not necessarily the reality. Many seniors did not properly plan for retirement or were unable to contribute to their retirement plans. They may have invested in a “surefire” investment that did not work out well. Perhaps their medical needs are so high that they are compelled to drain their savings just to get medicine. These can be stressful realities for seniors who have a fixed income and feel that there are little or no prospects for other sources of income.

In addition to the reverse mortgage tool that allows seniors to incrementally pull money out of their home equity in exchange for cash, bankruptcy may be a tool for seniors struggling with finances. As mentioned, seniors may feel that there are no job prospects and little chance to generate income. They may own their house in a retirement community and not have a car or have a car that is rarely used. If they find themselves in debt, they might try to get out of it. Even when the debt continues to accumulate, they try like all others. However, because there are no job prospects wherein a bankruptcy filing can ruin the chance at a job, filing for bankruptcy is often an attractive option for seniors. They do not need a car and they often own their houses. They are not moving. This may be an attractive option, provided that they are honest debtors.

In debt? Bankruptcy may be right for you. Contact the Bay Area debt relief firm of Melanie Tavare.