Soaring bankruptcy rates signal a 'coming storm of broke elderly,' study finds

Older Americans are filing for bankruptcy at more than double the rate of just 25 years ago, a sign of a "coming storm of broke elderly," a new study finds.

The rate of people 65 and over filing for bankruptcy grew nearly 204 percent from 1991 to 2016, a study published by the Social Science Research Network found, and the percentage of seniors among all U.S. bankruptcy filers increased by nearly five times over the same period.

Researchers looking at data from the Consumer Bankruptcy Project found that high health care costs, combined with reduced incomes and the widespread decline of pensions, are all contributing to the growing trend of "financially broken retirees."

Deborah Thorne, one of the study's authors from the University of Idaho, said "it's not an individual's fault" when they have to file for bankruptcy, citing issues with retirement systems and Medicare.

Thorne said her research found that many older people struggling financially also feel that society seems unconcerned with their plight.

"We've become uncaring about what they're confronting," she said.

'The bills began piling up'

Medical costs are a frequent tipping point for older bankruptcy filers, the study found.

Although Medicare is a great start for covering seniors' health care costs, many people don't realize that it doesn't cover everything, Thorne said.

Long-term care, hearing aids, most dental treatment, eye exams for glasses and foot care are among the many things Medicare Part A and Part B plans do not cover. Medicare can also involve copays, coinsurance, and deductibles that may be difficult for some seniors on reduced incomes to afford.

"My bankruptcy started with back surgery," one older bankruptcy filer told the study's authors. "I had several medical tests that my insurance did not cover. This caused me to fall behind in my medical payments. The next thing I knew, the bills began piling up. I got to the point I owed more than I was making on Social Security."

Medical problems can also lead people to stop working, worsening their financial struggles.

"My wife developed medical problems and had to leave her job, resulting in a loss of income. About two years later, I developed medical problems and was not able to continue working," another respondent told the study's authors. "We got to a point where we simply could not handle the debt load. The constant calls from bill collectors forced us to contact an attorney for help."

Out-of-pocket health care costs for Americans on Medicare ate up 41 percent of the average Social Security income in 2013, the nonprofit Kaiser Family Foundation reported. Those costs are expected to rise to 50 percent of average Social Security income by 2030, the organization found.

Retirement finance experts also agree that older Americans must plan for hefty health care costs.

"A 65-year old couple retiring this year will need $280,000 to cover health care and medical expenses throughout retirement, Fidelity reported earlier this year.

While that is just a 2 percent increase from last year, Fidelity's estimate has risen 75 percent since 2002, when the firm first estimated health care costs during retirement would be about $160,000.

Seniors unable to cover such costs may go into debt. Medical debt poses the most significant barrier to economic well-being for older Americans, a survey of aging professionals conducted by the National Council on Aging found.

"Over half indicated that medical debt was the most significant barrier to the economic well-being of seniors, while nearly 20 percent said that missed utility payments were the biggest problem," the council reported.

A long road to bankruptcy

Most Americans who go into bankruptcy first try for years to pay their bills.

Bankruptcy lawyer Charles Juntikka said he has seen a "frightening" increase in older clients during his 34 years in practice in New York and New Jersey.

Many of them have used credit cards to pay medical costs, the dentist or their mortgage, then spent years scraping together minimum payments of $80 or $90 a month for their cards without achieving any significant reduction in the principal balance.

"The problem with my older bankrupt people is they paid for years" but the principal on the credit cards barely budges, Juntikka told ABC News.

Seniors are often reluctant to file for bankruptcy, having been brought up by people who endured the Great Depression, Juntikka said.

Many think that only "crooked" businesses go bankrupt, but decent people pay their bills.

"They blame themselves," he added.

Typically, something triggers people to reach out to a bankruptcy lawyer, and it is often a creditor's threat to sue, Juntikka said.

The "Graying of U.S. Bankruptcy" study similarly found that among older bankruptcy filers, more than four out of 10 -- 42.6 percent -- struggled for two to five years to manage their bills before going bankrupt.

The trend is similar for all bankrupt households, regardless of age, the study said.

"With few exceptions, the road to bankruptcy is long," researchers wrote.

If you or someone you know is struggling with debt, there is help available. One source of information on debt, credit counseling and bankruptcy is this government website, Dealing with Debt.