Bankruptcy among those aged 65 and up used to be a rare phenomenon. Now, however, with much of the elderly population on fixed incomes, combined with rising medical costs, credit card debt and diminished portfolios and home values, managing to pay the bills is becoming very difficult for many seniors. Debts that were manageable when working are often impossible to service after retirement.

Credit cards often make up a large portion of the debt. A growing portion of the elderly pay for items with credit cards, often in order to keep up with day-to-day expenses. Not only do the elderly report having more credit cards, the average debt is in excess of $10,000, higher than other age demographics, reported Demos, a D.C. based public policy group.

In 2010, seven percent of all bankruptcy filers were 65 or older. A University of Michigan study found that senior-citizen bankruptcy filings were increasing by the largest percentage of any age group.

Preparing for Medical Costs After Retirement

Medical costs, such as the rising price of prescription drugs and long-lasting illnesses, are also a significant reason seniors file for bankruptcy.

A few actions to consider in preparation for medical costs:

• First, make a budget. Look at expenses, income and debt. Is there credit card debt? Is it manageable? Do you reasonably have enough money to cover expenses like deductibles and prescriptions and still pay off debt?
• Understand your health care coverage and Medicare. Medicare covers quite a bit of health care costs, but not everything. Look to fill gaps in Medicare with insurance coverage, and understand out-of-pocket expenses.
• Expect health care costs. You will pay a higher premium if you wait until you need catastrophic coverage before buying insurance.

When Should an Elderly Person with Debt File for Bankruptcy?

Filing for bankruptcy is not an easy decision. Some elderly feel filing for bankruptcy has a stigma attached to it. Yet, bankruptcy can be helpful for many seniors as a way to manage debt and a good way to stop creditors from harassing you or your elderly parent. Used appropriately, a bankruptcy can be an important part of retirement planning. Only an experienced bankruptcy attorney can tell you if it is appropriate to file for bankruptcy.