AILSA CHANG, HOST:
More older Americans are showing up in bankruptcy court. The rate of seniors age 65 and older who have filed for bankruptcy has tripled since 1991. That statistic comes from a new study from the Consumer Bankruptcy Project. It's a research collaboration funded by several universities. Deborah Thorne of the University of Idaho is the study's lead author. And I asked her why more older Americans are turning to an option often thought of as a last resort.
DEBORAH THORNE: Based on their answers to surveys, the lead causes of being in bankruptcy are medical expenses and declines in income. So it could be, you know, they lost money in 2008, or they've outlived their retirement 'cause they no longer get a defined benefit or a pension. So they've had a decline in income, or they've had medical expenses that they just absolutely cannot keep up with.
CHANG: But this is a very different picture than what existed, say, a few decades ago, right?
THORNE: Sure. So if we look at this historically, we had Social Security in place that was adequate, right? You could start full benefits, full replacement benefits at earlier ages. And we had defined benefits rather than defined contributions where we weren't taking the risk ourselves. So what we've seen is these risks that are just in life have been shifted off onto individuals. And that has been exacerbated by policy decisions over about the last 20 years.
The financial squeeze on older Americans has just gotten tighter and tighter and tighter as we have weakened the social safety net that they can depend on. And here's the pickle for them, is that they're older, so they cannot recover. They cannot go back to work at 65 and 70 years old and recover the money that they've lost.
So quick example - I had a woman contact me this morning. She said, I'm 71. We lost $200,000 in - of our retirement in the collapse in 2008. She's driving for Uber Eats at 71 years old. She said, we'll never recover. So if you go through bankruptcy of 45, you can bounce back to a large degree. Not so if you're 65. You cannot hit the job market and expect to be hired at a decent salary even if you're healthy enough, right?
CHANG: Right. I mean, bankruptcy's usually thought of as a way to get a fresh start when everything else has failed.
THORNE: Right.
CHANG: And if this older generation can't bounce back after bankruptcy...
THORNE: No.
CHANG: ...What is the calculation behind declaring bankruptcy, because there's just no other choice available?
THORNE: Well, they're drowning in debt. And see; here's something that's really tragic, is when they strip their 401(k)s and their retirements to try to pay their bills. And they have nothing left to draw on. And they cannot stave off the debt collectors any longer. And that's finally what pushes them over the edge. That's the calculation really that they make in their head. We have done everything we possibly could. We are tapped out. And they - you know, it's like they throw up their hands and they say uncle. We can't stand this anymore.
CHANG: What kind of reaction have you heard to your study? I mean, have advocacy groups such as the AARP reached out to you? Have they...
THORNE: Yes.
CHANG: ...Pointed to your study as an impetus for maybe thinking about new policies?
THORNE: Nothing's come about yet because it just came out this morning. We would hope that policymakers would decide to make this a priority and provide some security, financial security through more affordable medical care and more security in how older people manage their retirement accounts. And we hope the policymakers will step up and shift policy so that there's more protection for older Americans.
CHANG: Deborah Thorne is the lead author of a new study called "Graying Of U.S. Bankruptcy: Fallout From Life In A Risk Society." Thank you very much for being with us.
THORNE: You're so welcome. Transcript provided by NPR, Copyright NPR.