Can the Bankruptcy Code save financially-stressed seniors?

Looking back over my case load in 2023, I identified and quantified where I expended my time and energy working on cases for my already existing client-base. I found that a vast majority of my work as a trial advocate and/or counselor at law in my bankruptcy practice related to matters involving either an individual debtor who was a senior client or debtors who were couples, with at least one senior spouse or partner. (See Law.Cornell.Edu. The term "senior" means an individual who is 65 years of age or older.) In addition, I found that an even higher number of the potential clients who have reached out to me this year seeking assistance, in excess of 80%, were and remain seniors.

These observations caused me to conduct some preliminary research into the financial status of seniors here in the United States. This helped me determine if my observations truly reflected an unbiased evidence-based sample of the legal landscape of the territory I serve, or if I made the conscious decision to focus on this demographic, resulting in me selecting clients.Therefore, my perspective, as well as those of my clients and potential client-base, were skewed towards seniors and disabled adults already experiencing some form of financial distress. Furthermore, I wondered if there was/is a real observable and quantifiable trend in the legal services marketplace showing an increase in the number of seniors needing bankruptcy protection. I wanted to know what, if anything, were/are the objective and observable factors causing seniors to fall into financial distress in 2023.

As such, I reviewed some objectively reliable media, scholarly research, and governmental reports, along with other resources at my disposal, and found that seniors in the United States are increasingly falling into financial distress. Further, my research revealed that this phenomenon has been caused by the convergence of the following discrete factors:

(1) There is direct evidence of an ever-increasing number of seniors in the United States as the 'baby boomer' generation, estimated to total 76.4 million, continues to age. Data from the U.S. Census Bureau show that from 2010 to 2020, the number of Americans 65 years and over increased from 40,267,984 to 55,792,501, representing an increase of 15,524,517, or by 38.6%, making seniors 16.8% of the total U.S. population of 331,449,281. See U.S. Census Bureau, "Age and Sex Compositions: 2020 Census Brief." See United States Census Bureau, "2020 Census Will Help Policymakers Prepare for the Incoming Wave of Aging Boomers." See PRB, "[d]ata from the U.S. Census Bureau show that as of April 2014, there are 76.4 million baby boomers." See, "Just How Many Baby Boomers Are There?"

(2) As of Q3 2021, roughly 67% of Americans aged 65 to 74 were retired, relying on sources such as their pensions, if any, their savings, if any, and their Social Security benefits for their monthly income. (See Pew Research data. "Amid the pandemic, a rising share of older U.S. adults are now retired."

(3) It is estimated that, on average, a person who turns 65 this year will live another 18 to 21 years, depending on their gender. For example, a woman who turned 65 on Jan. 1, 2023 will live an additional 21.2 years (See the Social Security Administration); while a man who turned 65 on Jan. 1, 2023, will live an additional 18.6 years. Id.

(4) It has been estimated that on average, in order to fund a "satisfactory standard to living" while employed, also known as a "living wage," a single worker living in a one-person household must produce an income of at least $57,200 (according to GOBankingRates.com) and $59,428 in order to prevent that individual from falling into poverty in the United States. See, "Average Salary by State in (2023)," Forbes.

(5) It is also estimated that a retiree will only require 80% of her living wage in retirement because she will be able to reduce or eliminate some expenses required as a wage earner. See "Will Your Retirement Income Be Enough? Start by estimating your future expenses." Investopedia. That means the living wage figures of $57,200 and $59,428 may be reduced to $45,760 and $47,542.40, respectively.

(6) According to Motley Fool, citing U.S. Census Bureau data for 2022 as its source, the monthly living expenses for a person 65 or older are: $1,455 for housing; $568 for transportation; $562 for healthcare; $345 for food at home; $237 for cash contributions; $232 for personal insurance; $197 for entertainment; $167 for food away from home; $88 for clothing and services; $36.00 for alcohol, $51 for personal care; $12 for reading; $33 for education; $18 for tobacco products; and $72 for miscellaneous items. This totals $4,073 per month or $48,876 annually. See "This is the Average Income for Retirees in America," The Motley Fool. However, according to the U.S. Bureau of Labor Statistics, a household of one person run by someone 65 or older spends on average $52,141 per year or $4,345 per month; See U.S. Bureau of Labor Statistics, Consumer Expenditures Report 2021.

(7) Again, according to Motley Fool, the average income for an American male, 65 and older, is $46,337, while the mean is $29,275; the average income for an American female, 65 and older, is $38,298, while the median is $25,212. Id.

(8) Several experts on retirement have given various estimates about how much individuals need to save by age 65 to fund their living expenses in retirement. Some say a pre-retiree will need at least $1 million. However, in a study released by Charles Schwab in August 2023, it found that most of its 401(k) participants believe that they will need $1.8M. Others say 80% to 90% of the retiree's yearly income before quitting work. Still others say the amount should be 10 to 12 times what the retiree used to make annually in order to retire comfortably. Taking the last example and using the living wage averages in paragraph 4 above, $57,200 x 12 = $686,400, while $59,428 x 12 = $713,136. If the senior follows the "4% withdrawal rule" from her $686,400 nest egg, she will take $27,456 each year, or $2,288 per month, to fund her retirement. If she had accumulated $713,136, she could take $28,525.44 a year or $2,377.12 per month to fund her retirement.

(9) Unfortunately, instead of the nest egg numbers in paragraph 8, which are insufficient, most seniors between the age of 65 to 74 have, on average, only $57,670 in savings, with a mean balance of only $8,000, See "Average American Savings Account Balance," Time.com, Sept. 18, 2023, with a median total net worth of only $266,400. See CNBC Select: Here's the average net worth of Americans ages 65 to 74. That means that if the retiree used the "4% withdrawal rule," the retiree generated only $2,306.80 a year, or $192.23 monthly, if the senior had a $57,670 nest egg, or an abysmal $320 per year, or $26.67 monthly, if the senior had an $8,000 nest egg.

(10) In 2021, pension benefits in the US provided annual median incomes of as much as $26,734 for former federal government employees, $22,860 for former state and local government employees, $22,658 for retired service members, and $13,479 in veterans benefits, with a median annual benefit for private pensions and annuities of $10,606 for those lucky enough to have been employed by state or federal government or in a union shop. Unfortunately, these benefits only reach less than one third of older adults. See Pension Rights Center. That means more than two thirds of seniors receive no pensions at all and must rely solely on their Social Security benefit of $1,837.29 per month, which generates $22,047.48 per year.

(11) So, if two thirds of American seniors are relying solely on their Social Security benefits of $1,837.29 per month, while needing $4,345 to fund a sustainable single person household, the numbers do not add up. A senior in such a situation is running a ($2,507.71) deficient each month, which is a clear indicator of financial distress, necessitating their need to file for bankruptcy and other financial aid.

These preliminary findings do not bode well for our ability to guarantee a quality of life in retirement for our aging population unless, and until, we, the people of the United States, through our elected members of Congress, reform or at least tweak the United States Bankruptcy Code to be more liberal to seniors. This is especially the case where Sept. 30, 2023 marked the end of the Covid-19-related moratorium on student loan debt repayments for the 3.5 million Americans 60 and older holding more than $125 billion in student loans. Concurrently, we witness a majority in at least one of the chambers of Congress look for ways to reduce, if not totally eliminate, the funding mechanisms for our country's long-standing commitment to maintaining the solvency of the Social Security fund and Medicare benefits as a tool to balance the United States Budget. See "New America, Why Do So Many Older Americans Owe Student Loans?"

As such, I project that the trend I have witnessed in my own practice will continue as more and more seniors fall into financial distress with only limited tools available to them when they venture into the bankruptcy court.