Minnesota seniors have not been immune to the rising costs of health care and the financial hardships it causes. Many senior households have already depleted their lifetime savings accounts and may well be using their credit cards to cover their monthly bills because their Social Security check(s) simply do not stretch far enough.
All this has led to a new American phenomenon: gray bankruptcy. The term refers to those aged 65 and over who have been forced to declare bankruptcy as the only way out of their crushing debt. Sadly, their percentages have gone from only 2.1% of all bankruptcies filed in 1991 to 12.2% today.
Gray bankruptcy causes
Most seniors file for Chapter 7 because not only does it represent the simplest type of bankruptcy, it also discharges virtually all their credit card debt, which often represents their highest debt.
Whether Chapter 7 or Chapter 13, however, the most common gray bankruptcy causes include the following:
- Longer waits for Social Security benefits
- Skyrocketing health care costs
- Larger Medicare coverage gaps
- Larger credit card balances
- Fewer meaningful savings accounts
Health care crisis
Despite the benefits that some seniors obtained from Obamacare, the crisis in American health care insurance coverage has negatively impacted millions of them. Sadly, many seniors who rely on Social Security as their only source of income wind up spending close to 41% of their checks on prescription medicines and health care co-pays. This puts many of them in the untenable position of having to choose between buying their medications and buying their groceries.
The second reason why so many seniors must file bankruptcy today is that families can no longer save like they once did. Statistics tell a sad story. Senior-headed households today have a median savings of only $60,000. Worse yet, families comprising the lower 25% of senior-headed households have only about $3,000 in savings. Neither of these amounts will cover a medical emergency or hospitalization.
Obviously, the traditional safety nets have become torn and tattered. For far too many seniors, gray bankruptcy is the only viable option.