Imagine working hard your entire life, raising children, paying off a mortgage and putting money back for that glorious day when you walk out of your employer’s door for the last time and into retirement and all that it promises. And then imagine the moment you realize your efforts weren’t enough. You believed they were and you’d been told to play by the rules and it all falls into place – except, it didn’t fall into place. A new report reveals that bankruptcy filings among senior citizens and the elderly are up by 12 percent – and climbing. These bankruptcies make up nearly a quarter of all filings in the U.S.
Bankruptcy and the Elderly
How could it have happened?
Health care costs are rising fast as are the costs for much-needed prescription drugs. While many have the additional Medicare coverage, there are fears that new regulations will soon make it impossible for many of those providing the prescription drug plans to continue. As a result, it seems as though a vicious cycle begins. Seniors have already tapping into their savings accounts – the very same ones they prided themselves in building over the years. It depletes far faster than it ever grew. Soon, many turn to credit cards, even after they confidently entered into retirement debt free. They’re now in jeopardy of tarnishing an otherwise perfect credit history.
Most don’t want to burden their adult children, so they continue the cycle with hopes that they’ll be able to handle it. A common misconception is the belief that retirement could be financed on their Social Security, only to learn it’s anything but what they planned. The elderly who are in trouble are frequently very embarrassed and don’t know how to get help even if they had the courage to tell someone – and that includes their own attorneys. In fact, it’s becoming increasingly clear that their family members don’t know the depths of their parents’ financial troubles until they learn of the mounting credit card debt and even foreclosure. “Those were the kinds of things I couldn’t hide from my daughters,” stated one client in late 2013.
Supporting Adult Children
Flipping the tables for a minute, with the tough economic years behind us, many adult children turned to their parents for financial guidance until they could rebuild their own finances. It’s important to remember that it’s not always the children now caring for their parents, but rather, the same dynamics flipped as the parent caring for her child – regardless of how old that child is.
The trend really began in the 1990s when seniors began feeling the tightening of their wallets. Sadly, they’re in a constant financial turmoil and for many, they believe they have no other option but to turn to the bankruptcy courts for relief from the debts that are overwhelming them.
Unethical Business Practices
If that’s not enough, the efforts of scam artists and other criminals are on the rise too. Unethical business practices from credit card companies and mortgage companies bring additional burdens. A payment might be missed, which triggers an increase in the interest rate and so the cycle goes.
So what are your options if you realize an elderly loved one is in too deep? It’s important to put into place proper legal protections so that a trusted family member may step up to the plate and offset the losses before it gets as far as foreclosure or bankruptcy. A financial power of attorney is a great place to start. Your elderly loved one’s estate planning or elder law attorney can help navigate the process. These powers of attorney are important in anyone’s estate plan, but the older we get, the more crucial they become.