Filers Most Likely in 25-44 Age Range
Debtors are not required to report their age on Schedule I of their bankruptcy petitions, but some do. Our research database contains 1,931 no-asset chapter 7 cases that were closed in 2000. Debtors in 390 of these cases reported their age on Schedule I. Including joint debtors, we obtained the ages of 539 debtors or joint debtors of the 2,595 in our database.
With only about a 20 percent age reporting rate, we cannot be sure that the debtors who reported their age are representative of the debtors who did not. However, as noted in Table 1, their financial profiles were fairly close to that of the typical no-asset chapter 7 debtor. The main difference is that joint debtors were somewhat more likely to report their ages than non-joint filers. This resulted in our sub-sample's having a higher proportion of homeowners, and a slightly larger average family size.
The average age of the debtors was 40.9 years. Their median age (one-half were older and one-half were younger) was 39. The youngest reported age was 19, and the oldest was 92. Table 2 compares the age of the reporting debtors with the distribution of ages of the adult population in the United States. The final column is computed by dividing the second column (percent of debtors) by the third column (percent of U.S. adults) and multiplying the result by 100. Values of less than 100 reflect fewer-than-expected debtors in that age category, and values of more than 100 reflect a greater-than-expected number of debtors in that age group.
The data indicate that the ages of 25-44 are the peak years for filing bankruptcy. People between the ages of 45 and 59 file at about the rate that would be expected by their proportion in the population at large. Filings in the 18-24 age range are less than one-half the expected rate, and the rate for people aged 60 or older is less than one-third the expected amount. These figures are consistent with those developed by Professors Sullivan, Westbrook and Warren that were cited in a recent report by the General Accounting Office.2
The financial profiles vary somewhat according to the age of the debtors. Table 3 compares the circumstances of debtors of different ages. In this table, for joint filings the age category is based on the age of the first listed debtor. All financial figures represent the mean or average figure. We also computed, but do not show here, the median figures. The medians follow the same basic patterns as the means, with one exception. The median unsecured debt for debtors age 60 or more is higher than the median for all other age cohorts.
Debtors in their 20s were nearly all employed, and reported somewhat lower asset and debt levels than other debtors. Employment levels were also high for debtors in their 30s, and they had the largest average family size for any age cohort. Compared to debtors of other ages, the debtors in their 40s have the highest gross incomes, and the highest amounts of real and personal property and secured and unsecured debt. Average family size and employment levels begin to drop for debtors in their 50s. Additionally, slightly lower homeownership rates in this age cohort led to lower real property and lower secured debt. Relatively few debtors aged 60 or older are employed, so gross monthly income is much lower. Homeownership is high, and many have some equity in their homes because they are the only age cohort whose average real property is worth more than their secured debt. Nearly all of their general unsecured debt is from credit cards, and total credit card debt among the reporters in this age group is nearly twice their annual income.
Credit Card Debt by Age
Credit card debt levels increased steadily based on the age of the debtors. Credit card debt levels were relatively low for debtors under the age of 25. However, these amounts were twice as high for debtors in their mid-30s, three times as high for debtors in their 50s, and about 5 times as high for debtors 60 or older.
There have been reports of high levels of credit card debt and financial distress among college students.3 While many students may have become overextended or have overused the credit available to them, our data indicate that very few are filing for chapter 7 bankruptcy. As noted above, filings were relatively low among the 19-to-24-year-old portion of the population, and their credit card debt levels tended to be much lower than for other debtors. Moreover, out of 29 debtors aged 19-24 in our database, only two were students. In fact, most of the debtors in the youngest category were employed in clerical, sales or blue-collar jobs, and about one-half reported having one or more children. Only three of these debtors had any student loan debt, and there was no evidence on the remaining petitions that any of the other debtors in this age group had dropped out of college.
Our data, which we cannot be certain is representative of all chapter 7 individual debtors, indicates that of the reporting age group:
- The peak bankruptcy years are 25-45;
- Average incomes of debtors are about the same for all ages, except for debtors aged 60 or older;
- Nearly 90 percent of debtors under age 40 are employed;
- Debt, asset and income levels are highest for debtors in their 40s;
- Credit card debt increases with age, and accounts for the vast majority of total unsecured debt reported by debtors 60 or older; and
- Chapter 7 filings by college students are infrequent.
3 For example, one widely quoted statement from an Indiana University administrator was, "We lose more students to credit card debt than academic failure." The Chicago Tribune, Aug. 16, 1998. Return to article