link Bankruptcy looms over many elderly Health care, credit cards are some of the factors By BARB GALBINCEA and KAREN FARKAS The Plain Dealer TOOLS Email Get section feed Print Subscribe NOW Comments Recommend (1) Joe Talaba's first inkling that his parents were in financial trouble came in a phone call: Joe, said his 85-year-old father, I think we're being evicted. Joe figured it was a mistake, a missing payment perhaps. But what he quickly found was that his parents, Joseph and Jane, really were behind on the lot rent for their manufactured home in Olmsted Falls, Ohio, and delinquent on utility bills. It took awhile longer to discover the extent of their debt: More than $80,000, much of it on credit cards. The interest rate on one account was 32.4 percent. Older Americans increasingly are being overwhelmed by debt. By one expert estimate, people 55 and older now account for more than 22 percent of those filing for bankruptcy, up from less than 10 percent in 1994. Many are like the Talabas, who until recently had steadfastly paid bills on time during their 61-year marriage and took pride in an exemplary credit rating. In April, they filed for bankruptcy. Their home is now up for sale. How did they reach this point? a bankruptcy trustee asked during his first meeting with them. "Because we don't have the money to pay the bills," Jane said. Unrealistic expectations Seniors are in financial distress for many reasons, from the exploding cost of health care — including prescription drugs — that either drains savings or is diverted to credit cards to necessities like food that are bought on credit. Unrealistic expectations about how much retirement income Social Security would provide, attempts to help adult children struggling financially themselves and the death of a spouse also contribute. The elderly often become dependent on credit cards by accepting offers that arrive in the mail and then charging the limit. They are helpless as interest rates rise and balances balloon, officials said. "It gangs up on these people and they just can't make ends meet," said Marc Gertz, an attorney handling a bankruptcy case for another elderly couple in Ohio. "They are embarrassed to seek help. To be subjected to the indignity of bankruptcy is just heartbreaking." Studies show that the debt burden among the elderly began growing in the early 1990s and has only worsened since then, according to a National Consumer Law Center report last year. "Older persons are going into debt, filing bankruptcy and in many cases losing their homes in greater numbers than ever before," the report said. When troubles began For the Talabas, all seemed well five years ago when they moved from North Olmsted, where the couple had raised five children, to the manufactured home in Olmsted Falls. It's near where the Talabas, now great-grandparents, met in the early 1940s when they worked in a restaurant that served family-style chicken dinners. Joseph retired from GM's Chevrolet plant in 1980 after a 31-year career as a draftsman. Having grown up during the Depression, he said he took special pains to live within his means. "Something like that makes you really careful," he said. The Talabas' finances started to founder when they began accepting the stream of credit card offers that spilled from the mail without realizing the perils. Jane, who is also 85, was making the minimum monthly payments, unaware that the account balance was actually growing because of interest. Medical bills also strained the budget and before long their checking account had a negative balance. Over four months, the bank levied $3,000 in overdraft charges against his parents' account, according to son Joe. No 'wiggle room' Deborah Thorne, an Ohio University professor and project director of the Consumer Bankruptcy Project based at Harvard, said she has talked to a number of seniors like the Talabas who never imagined they would face bankruptcy after a lifetime of paying bills on time. "There's no evidence they're purchasing yachts or jetting off to Tahiti," she said. "It's the things the rest of us confront, but we have wiggle room." "More and more people are vulnerable to higher health-care costs," said David Certner, director of legislative policy for AARP. He said the elderly are especially at risk because they may have difficulty getting insurance or having enough to cover their medical needs. He said AARP has not studied how people are paying for their health care but knows they are taking out second and third mortgages to pay for long-term care. Joe Talaba said he hopes that if anything good comes of his parents' experience, it's that more people will consider whether they should intervene in the financial affairs of an older relative. I'm not saying these people didn't save money but these statistics are scary.
If they absolutely has to spend the money then I guess you can not fault them for using credit cards, but couldn't they see the items on their bill and how much the interests were? I mean a few month maybe, but to run up 80K you really had to be doing some serious work there.
Hard to believe this is not another case of "I bought too much useless crap and now I am in trouble". I mean, outside of the costs of health care (which are insane), most of these are controllable, provided you are careful with your money.
I think some of you should be a little less judgemental. these people lived through a lot harder times than most of us grew up through. they know the value of a dollar
Sorry, I am not trying to rush judgment. I cannot blame senior citizens for relying on SS - it was pitched to them as something totally different than what it is now. However, pirc1 has a point - this article is not particularly full of detail, but this tidbit sticks out:
Exactly. At 30% it only takes little more than two years to double your debt and 7 years to grow the debt to 8 times. This is insane, I think they should cap the top rate at 18%.
What is the dollar Value of a Life? That is the question of our time. At what point does someone become too expensive to carry? Rocket River
That's why I said if it is for health reason, they you have to do what ever you need to do. This country definately needs a new medical system that can take care of the citizens better.
i agree. it's a joke. and chances are, their default was not because they missed a payment but rather that their debt-to-income ratio got out of whack...as they have little income. so the bank just said, "we see you have more debt than you can probably pay...so we're gonna make it a lot worse on you and double your interest rate...mmmmkay??" i don't see that as just. but i've come to the conclusion i'm a liberal freak, now.
Sort of like when your bank fines you for not having enough money. We are doing you a favor by taking more of what you don't have enough of away from you.
When I'm old, I'm going to do the same thing. I'll just rack up as much consumer debt as I can get my hands on, and then die on the credit card companies.
