Cecily O'Connor
RedwoodAge.com

Those over 55 are among a group of Americans that have experienced the sharpest increase in bankruptcy filings, thanks, in part, to the slowing economy and rising healthcare expenditures, a new study found.

The proportion of bankruptcy filings among Americans over 55, compared to other age groups, jumped to 22.3 percent in 2007, up from 8.2 percent in 1991, according to Elizabeth Warren, an attorney who compiled the study for AARP's Public Policy Institute. Retirees also are experiencing greater debt as the rate of filings among those aged 65 and older more than doubled since 1991.

"This study is cause for concern," said Susan Reinhard, senior vice president of the institute. "It indicates that financial security is progressively eroding for many older Americans. We are exploring why this is happening and what can be done to prevent it."

While it is possible that 2005 changes to bankruptcy law - which made it harder for consumers to prove they should be allowed to clear their debts - impacted various generations differently, bankruptcy's rising rates among the older population reflects the mounting financial stress so many Americans are under, the study found.

For boomers, bankruptcy is a big concern because it undermines their retirement security at a time when personal savings rates tend to be low and supplemental programs such as Social Security and Medicare are on shaky ground.

Median Filing Age Hits 43
While the bulk of bankruptcy filers are in their 30s and 40s, the financial landscape has shifted considerably among all age groups. For example, adults aged 34 or younger made up about a quarter of all bankrupt debtors in 2007, down from nearly half in 1991. 

However, the median age for bankruptcy filers increased to 43 years old in 2007 from 36.5 in 1991 as the declining economy, increasing healthcare costs, and a general lack of retirement preparedness has put aging Americans and their families at greater risk for bankruptcy and continued financial strain, the study found.

While lower bankruptcy filing rates for younger people may be the result of healthier finances, they could also point to a generation that's juggling liabilities longer before taking more extreme measures, Warren said.

"If that is the case, we can expect to see more bankruptcies on the horizon as Generations X and Y grow older," said Warren, a Leo Gottlieb Professor of Law at the Harvard Law School. "Our culture has normalized debt. Now, individuals nearing or in retirement are realizing how difficult it can be to manage that debt as they age."

Funding for the report was provided by AARP, the Robert Wood Johnson Foundation, the Federal Deposit Insurance Corporation, the University of Michigan Research Initiative Grant Program and the Harvard Law School Dean's Fund.