When the economy tanked in 2008, Alvin Ferdinand depleted his retirement nest egg and maxed out his personal credit cards trying to save his Michigan business. At age 64, he says, he had no choice but to file for bankruptcy, losing the three assisted living facilities he owned and administered.
Irene Froehlich, 61, dutifully paid her credit card bills on time, even after her commission-only income fell by 75 percent two years ago. But when the credit card companies raised her interest rates, says the Chicago resident, she was backed into a financial corner. She filed for bankruptcy in November 2009.
The recession that drove these two people to the edge is helping drive a larger trend: a rising rate of bankruptcy filings by older Americans. Historically, soaring medical debt was the main reason older adults took this extreme step.
Often they refinanced their mortgages, tapping equity in their homes to pay off billowing credit card debt. When home values fell, many lost some or all of their equity and, consequently, their retirement savings.
Then there are people who lost jobs in the recession and lived on credit cards for about a year before filing for bankruptcy, says Theodore Connolly, a Boston bankruptcy attorney, explaining his clients' predicaments.
Some of the older filers are people who have already retired and are looking to stretch their limited incomes by lowering or eliminating monthly debt payments. For people who are still working, experts say, filing for bankruptcy could push retirement far off into the future, forcing them to keep working longer than they'd planned to rebuild savings.
Froehlich, for one, says she never planned to stop working, even before she filed: "I think people have this mind-set that they should retire at a certain age. Why? Just keep going. It keeps your mind active and it gives you a purpose."
Bob Calandra is a freelance writer living near Philadelphia.