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Aging into Bankruptcy

We live in a society where we trade our labor for money in order to survive; therefore, it is part of the natural course that as we age, our ability to support ourselves financially declines.  Without a strong social safety net, only those with savings can retire comfortably.

As a result of this painful reality, the United States government passed the Social Security Act of 1935 to guarantee a source of income to replace earnings for individuals 65 and older.  A 1965 amendment created Medicare to assist this same population with health insurance costs. These government-run, public welfare programs operate by requiring everyone in society to contribute to them, the rationale being that almost everyone will need them when he or she retires.

However, all is not well with our safety net.  Wages have stagnated, housing and education costs have skyrocketed disproportionately, and Congress is proposing drastic measures that will all but gut both programs.

What is left of the middle class and below is beginning to rely more and more heavily on bankruptcy for financial survival.  Although leadership from both parties has not done the programs any favors, Ronald Reagan arguably hurt them the worst when he proclaimed: “Government is not the solution to our problem.  Government is the problem.” Not unexpectedly, this attitude bore fruit for those who were already wealthy, since lower taxes and decreased funding for social welfare programs meant the wealthiest Americans did not need to sacrifice anything for their less-fortunate countrymen.

Not much has changed since then.  The Consumer Bankruptcy Project found that since 1991, the rate of Americans between 65 and 74 filing for bankruptcy has doubled, and the rate for those age 75+ has tripled.

As the Project stated: “The changes are so great that the broader trend of an aging US population can explain only a small proportion of what is happening in the bankruptcy courts.  Older Americans’ reported reasons for filing strongly suggest that they are experiencing the fallout from our current individualized risk society and the corresponding shrinkage of their social safety net.”