The number of baby boomers who file for bankruptcy has increased significantly in the last three decades. Only around 2% of all elders in the U.S. filed for bankruptcy in 1991, and the number stands at around 12% now. While bankruptcy can give people a fresh start if they are going through financial hardship, it comes at a cost. So, why is there an increase in bankruptcy cases among baby boomers?
According to an article in subscription-based Financial Times, American bankruptcy courts are witnessing an increasing number of cases filed by older people. Reasons come in the form of rising healthcare costs, inadequate income, disappearing pensions, unpaid student loans, as well as other costs related to their children. Many boomers in country deal with surmounting financial risks in what should be their golden years, and bankruptcy is often last resort.
Can You Prevent Bankruptcy?
If you find yourself struggling to keep up with your monthly repayments, it is important that you take proactive measures at the earliest, through which you might be able to avoid bankruptcy.
Make a Budget and Reduce Spending
Making a budget gives you means to identify just where your money is going. Then, you need to find expenses you can do without. These can come in the form of memberships, subscriptions, dining out, and going on vacations. If you feel you can live in a smaller house, you may think about downsizing, as it can offer monetary benefits. This holds true even if you have an existing mortgage, as you might then need to make smaller monthly repayments.
Supplement Your Income
Try to supplement your existing income even if it involves going back to school or earning a new certification. Look for ways to create passive income by leveraging what the internet has to offer. Find out if you qualify for government assistance programs surrounding mortgage forbearance, medical care, and food assistance. Other ways in which you may consider increasing your income include:
- Asking for a promotion or a raise
- Monetizing your hobbies
- Driving for rideshare companies
- Selling some of your assets
Contact Your Creditors
Creditors of unsecured debt tend to lose their money when borrowers get bankruptcy discharges, which is why they are typically open to negotiation. Contact your creditors and tell them you wish to repay your debts, while asking for assistance in the form of lower interest rates or monthly payments. In some cases, you might benefit by debt relief, through which get to reduce the total amount you owe significantly.
Debt consolidation refers to the process of paying off high interest debts by getting a loan with a low interest rate. If you qualify for a debt consolidation loan, it might work as an effective tool in avoiding bankruptcy. However, remember that you still need to make a consolidated monthly payment and put the brakes on spending.
What Happens If You File for Bankruptcy?
The end result of a bankruptcy case depends on whether you file under Chapter 7 or Chapter 13 – the two most common types made available for individuals.
- Chapter 7. The court appoints a trustee to sell your nonexempt property and use the proceeds to repay your debts. The entire process can take three to four months. High income earners might not qualify.
- Chapter 13. You get the ability to hold on to your assets. However, you need to keep making revised monthly payments to repay your debt. The entire process can take three to five years.
Fraught with financial risk during old age, several boomers continue struggling with unmanageable costs, surmounting debt, and inadequate income. If you feel you might need to file for bankruptcy at some stage, start taking measures to avoid it in the first place. If you’ve been through financial counseling and think you’re left with no other option, discuss your case with a bankruptcy attorney at the earliest.