The number of Americans filing for bankruptcy protection rises almost every year. As scholars study bankruptcy filings, they seek to determine the reasons why individuals choose to use the bankruptcy system to remedy financial distress. Some studies conclude that at least half, and probably more than half, of bankruptcy filings result from medical expense In addition, they suggest that medical expenses are more likely to be the cause of a bankruptcy filing for older debtors. However, others challenge the conclusion that so much debt results from medical expenses. But the reasons why people fall into debt or choose the “last resort” option of bankruptcy must be considered as legislators debate such timely issues as health care, credit card debt, and unemployment concerns.
For the elderly in our previous study,credit card debt outpaced clear medical debt by a ratio of six to one. But that knowledge creates more questions regarding why the elderly incurred the credit card debt. And if that reason is not medical expenses, why do the elderly enjoy some immunity from the medically related bankruptcies that seem to plague younger generations? This study examines the credit card debt of debtors within our previous study as well as the medical insurance of our elderly debtors, in an effort to answer some of these questions. It also seeks to consider how the availability of Medicare for the elderly may impact their medical debt levels and affect whether they file bankruptcy for medical or other reasons in order to make suggestions regarding the need for law reform and recommendations for Baby Boomers who are planning for retirement.
Unfortunately, credit card statements are rarely filed within a bankruptcy case. Even proof of claim forms from credit card companies do not typically include the statements as part of the proof of claim. Thus, in order to better understand the credit card debt incurred by our debtors, we sent a questionnaire to each debtor in our study. We also sent a different questionnaire to each debtor's attorney of record. The debtors' questionnaire asked what type of expenses the debtor charged to a credit card, what type of medical insurance the debtor had, and whether medical expenses were part of the credit card debt. The questionnaire also allowed debtors to indicate a willingness to speak directly with the researchers. The attorneys' questionnaire asked about the impressions that the attorneys have of the reasons why elderly debtors file for bankruptcy protection, and how those reasons compare to their other non-elderly clients. Like the debtors' questionnaire, the attorneys' questionnaire asked attorneys to indicate whether they were willing to be interviewed as part of the study.
The debtors and their attorneys provided slightly different perspectives on the reasons why the elderly debtors in our study filed for bankruptcy protection. While the attorneys overwhelmingly indicated that credit card debt and a lack of income or reduced income caused elderly debtors to utilize the bankruptcy system, the responses of the debtors themselves were more varied. The debtors agreed that credit card debt and limited income contributed heavily to their choice to file for bankruptcy protection, but they were more likely to cite other expenses as well. And, while these other expenses included medical bills and prescriptions, they were just as likely to include daily expenses shared by most generations equally such as automobile and grocery expenses.