Bankruptcy offers the chance for a fresh start for those with overwhelming debt who are unable to pay their bills. Once people file, they are no longer responsible for discharged debts.
Extreme medical debt is the main reason most Americans 55 and older consider bankruptcy, and the number of filings has surged since 1991.
Study finds alarming bankruptcy statistics
Six out of every 10 Americans over the age of 65 who file for bankruptcy cite medical debt as the major factor. The rise in medical costs may partially explain these stark findings published in a University of Illinois (UI) research paper:
- Bankruptcy filings for Americans age 55 to 64 increased by 66% from 1991 to 2016
- For those age 65 to 74, bankruptcies surged by an astonishing 204% during the same period
- 12% of all those filing for bankruptcy are 65 or older in 2016, while that percentage was 2% in 1991
The decline in savings is also a key factor
Researchers found that many seniors simply run out of money as more and more have little or no savings when they hit retirement age, while their income opportunities diminish.
Some who depend upon Social Security benefits to pay day-to-day living costs aren’t able to cope financially when unexpected major expenses occur.
How to recover from bankruptcy
The National Foundation for Credit Counseling advises people recovering from bankruptcy to:
- Have a goal to set aside three months of net income
- Try to save 10% to 20% of your income
- Sign up for secured credit card to rebuild your credit
- Make small purchases and pay off the balance each month
Repairing your credit
Bankruptcy can stay on a credit report for up to 10 years, and the most significant impact is usually felt within the first two years after filing. The more time that passes, the less impact it will have. Be sure to review your credit report every few months and correct any errors that could further damage your credit score.
Experts say adding a short statement to your credit report, explaining the circumstances behind your bankruptcy can also make a difference. An experienced bankruptcy attorney in Maryland can help you find a plan that best fits your situation.