Aging and Bankruptcy: Are Older Americans Truly Afforded an Economic Fresh Start

Abstract

The explosion of personal financial crisis, especially foreclosure, across large and diverse segments of the American population in 2007 and 2008 significantly impacted the American and global economies. This causal connection supports a hypothesis that reducing the incidence of personal financial crisis and accelerating recovery there from should have a positive macroeconomic impact. The first step in the development of effective educational programs that help Americans reduce the incidence of and/or recover from personal financial crisis is the clear identification of those Americans in personal financial crisis. In 2006, the Institute for Financial Literacy's Center for Consumer Financial Research (CCFR) established a comprehensive, neutral research program designed to collect demographic information from individuals contemplating and eventually filing for bankruptcy protection, a population that is by definition in personal financial crisis. Utilizing the Institute's capacity for large scale data collection, information was collected for the period January 1, 2006 through December 31, 2006 in the following categories: gender, age, ethnicity, educational attainment, personal income level, employment status, marital status and cause(s) of financial distress. Initial data analysis identified several demographic trends, including increased bankruptcy filing rates among older Americans. While overall findings were reported in Who Went Bankrupt in 2006? A Demographic Analysis of American Debtors in May 2007, this paper more specifically focuses on the categories of age, employment and causes of financial distress. In light of its findings, this paper challenges researchers and those developing financial education programs to address the unique challenges facing older Americans recovering from personal financial crisis given their shorter income horizons.