Bankruptcy on rise for older Americans

NEW YORK (CNNMoney.com) -- Americans aged 55 and older are filing for bankruptcy at a faster rate than the general population, a study released Friday reveals.

Researchers at the Administrative Office of the U.S. Courts found that petitioners over the age of 55 saw the fastest growth in Chapter 7 filings.

Chapter 7 provides for the liquidation of a debtor's nonexempt assets to pay creditors.

Filing rates for Americans 45 and over are increasing more than any other age category, from 27 percent of all filers in 1994 to 39 percent in 2002.

The study compared Chapter 7 and Chapter 13 consumer filing data from 1994 to 2002.

Chapter 13 allows debtors to retain their property and pay off debts over time.

The study's results are summarized in an articled titled, "Aging and Bankruptcy: The Baby Boomers Meet Up at Bankruptcy Court," to be published in May in the American Bankruptcy Institute Journal.

Researchers John Golmant and Tom Urlich conclude that rising healthcare costs and mortgage debt are key factors.

Golmant and Urlich expect increased bankruptcy filing rates for older Americans to continue, based on the reduced income retirees face coupled with rising healthcare costs, according to the report.

Mark Weisbrot, co-director of the Center for Economic and Policy, agrees with the report's conclusions but notes the study ends at 2002 and the figures since then "have gotten worse."

"It's particularly unfortunate now as the housing bubble bursts," said Weisbrot. "That's another major source of asset accumulation for retirement."

Weisbrot says that with the economy likely headed toward recession, things will probably get worse for people in that age group.