Bankruptcy trend graying — and younger people may be wising up

By DENNIS GRUBAUGH
    Thirty years ago, filing for personal bankruptcy was almost a sure way to screw up your life for a long time to come.
    I remember a friend who went through the process — she was years getting back on her feet. Back then, your credit rating took a hit and your ability to get loans was severely impaired. Things have not totally changed since then, but the entire process has been made much more cumbersome to go through, with more of the task of proving financial default left to the filer.
    That’s how it should be; it should not be an easy fix for dispatching of debts. It should be a last-ditch solution.
    I reflect on all this with the recent news that more older people are filing for bankruptcy. The rate of people 65 and older has more than doubled in the last 25 years, according to the Consumer Bankruptcy Project, which recently looked at the subject in detail. In 1991, 1.2 out 1,000 individuals between 65 and 74 years old filed for bankruptcy. By 2016, that number had risen to 3.6 per 1,000.
    I suspect what’s happening is that baby boomers have gotten in over their heads in one of a few ways: They’ve loaded up on unreasonable home mortgages; they’ve been strapped by medical bills; or they’ve overspent their resources on other, younger members of their families. It stands to reason that by living longer you’re going to be increasingly on edge financially. Your earnings power is dwindling, your health is declining, etc.
    More than anything, people simply haven’t saved for old age. Perhaps they’ve been victimized by loss of a pension. Perhaps they simply never made enough money. When you link a lifetime of bad luck, bad decisions, irresponsible spending and poor savings habits, anything can happen.
    If there is a silver lining, it’s in the people whose hair is not yet gray: Younger individuals are not filing for bankruptcy as much as they were. Judging from data between 1991 and 2016, such filings are down by 78 percent for people 18 to 24. They are down 64 percent for people 25 to 34; down 40 percent for those 35 to 44 years old; and down 2 percent for those 45 to 54.
    Younger people are not taking on the debt tactics of their forefathers. In fact, they’ve learned a lot from the Me Generation. They aren’t buying newer, pricier homes at the same pace (some aren’t buying hones, period). They’re better about setting up financial plans at a younger age, better at asking questions about health-care management, and not afraid to do things differently than tradition. And they have the modern-day advantage of being able to search
    subjects on Google.
    When I was a young man, I was more in touch with the way my parents did things — get a job, get a home, raise a family. Some of those priorities have changed. Carrying on family traditions is taking second fiddle to financial security for younger people. If putting off marriage — or not doing it at all — is what it takes to have long-term security, do it, I say.
    Not being responsible with your money in the early part of your life is not going to pay dividends as old age creeps in. The bankruptcy filings clearly indicate an unwelcome trend that is going to cost all of society if it doesn’t reverse itself soon.
    Dennis Grubaugh is editor and partner of the Illinois Business Journal. He can be reached at dgrubaugh@ibjonline.com or (618) 977-6865.