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By Tara Siegel Bernard
For a rapidly growing share of older Americans, traditional ideas about life in retirement are being upended by a dismal reality: bankruptcy.
The signs of potential trouble — vanishing pensions, soaring medical expenses, inadequate savings — have been building for years. Now, new research sheds light on the scope of the problem: The rate of people 65 and older filing for bankruptcy is three times what it was in 1991, the study found, and the same group accounts for a far greater share of all filers.
Driving the surge, the study suggests, is a three-decade shift of financial risk from government and employers to individuals, who are bearing an ever-greater responsibility for their own financial well-being as the social safety net shrinks.
The transfer has come in the form of, among other things, longer waits for full Social Security benefits, the replacement of employer-provided pensions with 401(k) savings plans and more out-of-pocket spending on health care. Declining incomes, whether in retirement or leading up to it, compound the challenge.
Cheryl Mcleod of Las Vegas filed for bankruptcy in January after struggling to keep up with her mortgage payments and other expenses. “I am 70, and I am working for less money than I ever did in my life,” she said. “This life stuff happens.”
As the study, from the Consumer Bankruptcy Project, explains, older people whose finances are precarious have few places to turn. “When the costs of aging are off-loaded onto a population that simply does not have access to adequate resources, something has to give,” the study says, “and older Americans turn to what little is left of the social safety net — bankruptcy court.”
“You can manage O.K. until there is a little stumble,” said Deborah Thorne, an associate professor of sociology at the University of Idaho and an author of the study. “It doesn’t even take a big thing.”
The forces at work affect many Americans, but older people are often less able to weather them, according to Professor Thorne and her colleagues in the study. Finding, and keeping, one job is hard enough for an older person. Taking on another to pay unexpected bills is almost unfathomable.
Bankruptcy can offer a fresh start for people who need one, but for older Americans it “is too little too late,” the study says. “By the time they file, their wealth has vanished and they simply do not have enough years to get back on their feet.”
The data gathered by the researchers is stark. From February 2013 to November 2016, there were 3.6 bankruptcy filers per 1,000 people 65 to 74; in 1991, there were 1.2.
Not only are more older people seeking relief through bankruptcy, but they also represent a widening slice of all filers: 12.2 percent of filers are now 65 or older, up from 2.1 percent in 1991.
The jump is so pronounced, the study says, that the aging of the baby boom generation cannot explain it.
Although the actual number of older people filing for bankruptcy was relatively small — about 100,000 a year during the period in question — the researchers said it signaled that there were many more people in financial distress.
“The people who show up in bankruptcy are always the tip of the iceberg,” said Robert M. Lawless, a law professor at the University of Illinois and another author of the study.
The next generation nearing retirement age is also filing for bankruptcy in greater numbers, and the average age of filers is rising, the study found.
Given the rate of increase, Professor Thorne said, “the only explanation that makes any sense are structural shifts.”
Ms. Mcleod said she had managed to get by for a while after separating from her husband several years ago. Eventually, though, she struggled to make ends meet on her income alone, and she fell behind on her mortgage payments.
She collects a small Social Security check and works at an adult day care center for people with intellectual disabilities and mental health problems. For $8.75 an hour, she makes sure clients participate in daily activities, calms them when they are irritated and tries to understand what they need when they have trouble expressing themselves.
“When I moved here from Los Angeles, I was wondering why all of these older people were working in convenience stores and fast-food restaurants,” she said. “It’s because they don’t make enough in retirement to support themselves.”
Ms. Mcleod said she hoped that filing for bankruptcy would help her catch up on her mortgage so she could stay in her home. “I am too old to move out of here,” she said. “I am trying to stay stable.”
The bankruptcy project is a long-running effort now led by Professor Thorne; Professor Lawless; Pamela Foohey, a law professor at Indiana University; and Katherine Porter, a law professor at the University of California, Irvine. The project — which is financed by their universities — collects and analyzes court records on a continuing basis and follows up with written questionnaires.
Their latest study —which was posted online on Sunday and has been submitted to an academic journal for peer review — is based on a sample of personal bankruptcy cases and questionnaires completed by 895 filers ages 19 to 92.
The questionnaire asked filers what led them to seek bankruptcy protection. Much like the broader population, people 65 and older usually cited multiple factors. About three in five said unmanageable medical expenses played a role. A little more than two-thirds cited a drop in income. Nearly three-quarters put some blame on hounding by debt collectors.
The study does not delve into those underlying factors, but separate data provides some insight. The median household led by someone 65 or older had liquid savings of $60,600 in 2016, according to the Employee Benefit Research Institute, whereas the bottom 25 percent of households had saved at most $3,260.
That doesn’t provide much of a financial cushion for a catastrophic health problem. Older Americans typically turn to Medicare to pay their medical bills. But gaps in coverage, high premiums and requirements that patients shoulder some costs force many lower-income beneficiaries to spend more of their own income on those bills, the Kaiser Family Foundation found.
By 2013, the average Medicare beneficiary’s out-of-pocket spending on health care consumed 41 percent of the average Social Security check, according to Kaiser, which also estimated that the figure would rise.
More people are also entering their later years carrying debt. For many of them, at least some of the debt is a mortgage — roughly 41 percent in 2016, compared with 21 percent in 1989, according to an Urban Institute analysis.
And those who are carrying debt into retirement are carrying more than members of earlier generations, an analysis by the Employee Benefit Research Institute found.
Perhaps not surprisingly, the lowest-income households led by individuals 55 or older carry the highest debt loads relative to their income. More than 13 percent of such households face debt payments that equal more than 40 percent of their income, nearly double the percentage of such families in 1991, the employee benefit institute found.
Older Americans’ finances are also being strained by the needs of those around them.
A little more than a third of the older filers who answered the researchers’ questionnaire said that helping others, like children or older parents, had contributed to their seeking bankruptcy protection. Marc Stern, a bankruptcy lawyer in Seattle, said he had seen the phenomenon again and again.
Some parents, Mr. Stern said, had co-signed loans for $10,000 or $20,000 for adult children and suddenly could no longer afford them. “When you are living on $2,000 a month and that includes Social Security — and you have rent and savings are minuscule — it is extremely difficult to recover from something like that,” he said.
Others had co-signed their children’s student loans. “I never saw parents with student loans 20 or 30 years ago,” Mr. Stern said.
“It is not uncommon to see student loans of $100,000,” he added. “Then, you see parents who have guaranteed some of these loans. They are no longer working, and they have these student loans that are difficult if not impossible to pay or discharge in bankruptcy, and these are the kids’ loans.”
Keith Morris, chief executive of Elder Law of Michigan, which runs a legal hotline for older adults, said the prospect of bankruptcy was a regular topic for his callers.
“They worked all of their lives, and did what they were supposed to do,” he said, “and through circumstances like a late-life divorce or a death of a spouse or having to raise grandkids, have put them in a situation where they are not able to make the bills.”
For Lawrence Sedita, a 74-year-old former carpenter now living in Las Vegas, the problems began when he lost his health insurance about two years ago. He said he had been on disability since 1991, when a double pack of 12-foot drywall fell on his head at work.
After his union, the New York City District Council of Carpenters, changed the eligibility requirements for his medical, dental and prescription drug insurance, he lost his coverage.
Mr. Sedita, who has Parkinson’s disease, said his medical expenses had risen exponentially. (A spokesman for the union declined to comment.)
A medication that helps reduce the shaking — a Parkinson’s symptom — rose to $1,100 every three months from $70, Mr. Sedita said. “I haven’t taken my medicine in three months since I can’t afford it,” he added.
He said he and his wife, who has cancer, filed for bankruptcy in June after living off their credit cards for a time. Their financial difficulty, he said, “has drained everything out of me.”
Copyright 2018 The New York Times.  All rights reserved,

Millennial marriages are crumbling under student loan debt.

One of the most common questions that we’re asked by clients who own “underwater taxi medallions” (where the value of the medallions is less than the amount of the loan secured by the medallions) that are owned by a corporation or a LLC is if we can “cram down” the taxi medallion loan in a chapter 11 bankruptcy filing. “Cram down” means that the bank/secured lender is required to accept less than full repayment of their loan.

If it were possible to cram down the average taxi medallion loan, the result would be advantageous to many taxi medallion owners–however, the reality is more complicated. For purposes of illustration, let’s assume that a corporation or an LLC owns one medallion that is subject to a $700,000 bank loan and the medallion has a current value of $165,000. Section 506(a) of the Bankruptcy Code provides that the bank (secured lender) has a secured claim of $165,000 (the value of the medallion) and an unsecured claim of $535,000 ($700,000 less $165,000). In a typical chapter 11 case under this scenario, the secured portion of the lender’s claim would be paid the present value of $165,000 over the duration of the plan (which could be five or more years) and the unsecured portion of the claim would be paid pennies on the dollar (let’s assume for this example 10 cents on the dollar or $16,500). Accordingly, in the chapter 11 plan, the bank would be paid a total of $222,120.02 ($205,620.02 (the present value of $165,000 over five years at a discount rate of 4.5%) + $16,500) over the duration of the plan instead of $700,000.
The above scenario would be a wonderful result for the underwater taxi medallion owner, but it’s difficult to achieve. Section 1111 of the Bankruptcy Code governs claims and interests in a chapter 11 caseand § 1129 pertains to the confirmation of a chapter 11 plan. With respect to the confirmation of a chapter 11 plan, the following needs to be noted:

In this author’s experience, about 10% of the chapter 11 bankruptcy filings for small businesses in the Southern District of New York are confirmed.2.     

It’s an expensive process to file a chapter 11 bankruptcy.  The filing fee is $1,717, the debtor’s legal fees are approximately $20,000 to $25,000, U.S. Trustee quarterly filing fees must be paid and the debtor (medallion owner) needs to obtain insurance, set up debtor-in-possession bank accounts and file monthly operating reports with the U.S. Trustee’s office (necessitating the retention of an accountant or an accounting firm).  3.     

To be confirmed, a chapter 11 plan must pass several tests.  One of these tests is the “best interest of creditors” test–creditors must not receive less in chapter 11 reorganization then they would if the case was filed as a chapter 7 liquidation. What that means is if the medallion is worth $165,000, then the secured creditor in a chapter 11 case must receive payments with a present value of $165,001. The plan proponent must also show “feasibility,” that the debtor will be able to make the payments required under the plan based on future earnings or assets or property that they own.4.     

Section 1129(b)(2)(a) of the Bankruptcy Code provides three possibilities related to the “fair and equitable” test to “cram down” a secured creditor: (1) full payment of the claim through a new loan at market value interest secured by the pre–petition collateral (not possible in the present market for taxi medallions); (2) sell the collateral with liens attached in the proceeds of the sale (not possible for taxi medallion owners who wants to continue to own their medallion); or (3) they must give the secured creditor the “indubitable equivalent” of its claim (essentially, payment in full or abandonment of the collateral to the lender).5.     

If the above obstacles to confirmation of a chapter 11 plan were not enough, there is yet another hurdle–§ 1111(b)(2)  of the Bankruptcy Code, which provides that if the loan was made on a non-recourse basis to the debtor, then the secured creditor can elect to have the full amount of their loan treated as secured (under our fact pattern to have their secured loan valued at  $700,000 not $165,000).  A non–recourse loan means that the loan documents provide that in the case of a foreclosure, the secured creditor is only able to obtain possession or seek recourse against the medallion and other collateral for the loan and not any other assets of the debtor.
Having reviewed the loan documents for many medallions, including the promissory note, the security agreement and the UCC-1 filing, it is this author’s experience that the vast majority of taxi medallion loans are non–recourse; accordingly, the secured creditor has the right and will be expected to make the §1111(b)(2) election. Moreover, since most taxi medallions are subject to a loan, the debtor must make loan payments and most medallions subject to a loan are not profitable, if the § 1111(b)(2) election is made, it will be almost impossible for an underwater taxi medallion owner to confirm a chapter 11 plan.
So, if the “cram down” of a secured creditor in chapter 11 bankruptcy isn’t possible, what is the underwater taxi medallion owner to do? We believe that the optimal strategy is to do the following: (1) retain an experienced attorney for asset protection planning (proactive legal action that protects your assets from future creditors, divorce, lawsuits or judgments); (2) engage in aggressive negotiations with the bank to refinance the loan or negotiate to surrender the medallion and other collateral for the loan; and (3) if the negotiations are unsuccessful, the taxi medallion owner (or guarantor) should consider filing for chapter 7 bankruptcy. Medallion owners who own underwater taxi medallions are encouraged to contact Jim Shenwick and arrange for a consultation to discuss the best solution for them. Jim Shenwick.

By Dan Rivoli and Jillian Jorgensen  The City Council will once again explore capping the number of vehicles driving for Uber and similar app-based taxi services in New York City streets — beginning with a yearlong ban on issuing new licenses for most for-hire cars.
The move comes three years after a similar effort to limit the ride-hailing apps in the name of congestion. It was pushed by Mayor de Blasio, viewed skeptically in the Council and failed in the summer of 2015 in the face of aggressive push back from Uber.

But calls for restrictions on the companies have grown in recent months, as studies have borne out that the cars — often driving without passengers — have indeed increased congestion. Perhaps more stark has been the reckoning of the services’ impact on the city’s old-fashioned taxi and livery industry, and on drivers who spent their entire fortunes or mortgaged their homes to buy taxi medallions, only to see them plummet in price. Six struggling drivers have killed themselves this year.

Council Speaker Corey Johnson (D-Manhattan) said the Council’s package of bills aimed to create fairness between the various kinds of taxis in the city, to support drivers who work for all those kinds of taxis, to combat congestion and increase accessibility for the disabled.

"We aren't taking away any service that is currently being offered to New Yorkers,” he said. "We are pausing the issuance of new licenses in an industry that has been allowed to proliferate without an appropriate check."

But Uber, as it did in 2015, promptly mobilized against the effort — rolling out a seven-figure television ad buy targeting the bills, in addition to ads on social media and elsewhere. That’s on top of a prior ad buy of more than $1 million for a campaign dubbed “Uber’s There.”
And the company will directly reach out to its millions of New York users by email, it said, a strategy that paid dividends three years ago.

“The New York City Council has proposed a series of bills that could make Uber more expensive and less reliable throughout the five boroughs — severely impacting those who rely on Uber when public transit isn’t an option,” the e-mail, shared with the News, will read.

The message includes a link allowing riders to “tweet to the City Council.” Sure enough, tweets started appearing online — some using the exact same language and the hashtag #DontStrandNYC.

The direct outreach went even further: Uber appears to be reaching out to New Yorkers by phone about the legislation, according to one source who received a call. The caller even tried to connect the source directly to their City Council member’s office, though the source noted the caller had the wrong district.

Lyft also pushed back against the cuts, arguing the city was fighting not for small-time medallion owners but “corporate” ones and misplacing blame for congestion.

“I think to put the blame squarely on ridesharing companies for that misses the point - there’s many studies that show ridesharing is not the cause of increased congestion,” Lyft communications director Adrian Durbin said.

Durbin, like his counterparts at Uber, argued the cap would make drivers head to the most lucrative area — Manhattan’s central business district, which would hurt outer borough riders and worsen congestion.

And the yearlong ban means the service will be unable to replace any driver who departs, he said.
But the bill does allow for the TLC to add new licenses if they don’t believe it will impact traffic — and it contains a carve-out allowing new licenses for wheelchair accessible cars.

"If any of these companies, like Uber, want to put a new wheelchair accessible vehicle on the road, they can do that,” Johnson said.

Medallion owners cheered the effort.

“In the last few years, Uber and other ride share companies have congested Manhattan streets, deprived passengers in wheelchairs from receiving meaningful service and decimated the lives of immigrant taxi drivers and their families,” the Metropolitan Taxicab Board of Trade said in a statement.

The board said the legislation was overdue but a “meaningful start” and urged the Council to pass them quickly.

De Blasio has long offered support for a cap on the services, and has repeatedly returned to the idea in discussing the driver suicides.

“As far as I can see this proposed legislation is addressing some really serious issues in a smart way, and I look forward to looking at it and I think the Council is trying to do something important here,” he said Friday.

While the last attempt to cap Uber went down in flames in the Council amid opposition, Johnson said that after drivers died by suicide, people have recognized it’s time to action.

"We are really just doing what we think is the right thing to do,” he said. “If that means that they're going to launch ads and campaign, I think it's our duty as elected officials to explain why we're doing this and to be able to explain that to the public on why we think this is a good public policy decision."

The bill to bar new licenses for a year is sponsored by Councilman Stephen Levin (D-Brooklyn).
"There's been an average 2,000 new vehicles added to the streets every single month,” Levin said. “At this point, it's pretty well-saturated, if not over saturated."

Council staff characterized the bill as a pause, not a cap — but the pause is intended to allow for a study of the impact of those vehicles and, after the study, to allow the TLC to cap new licenses if necessary. The TLC would also be able to set a “vehicle utilization standard” for the industry, aimed at regulating how often the cars are plying the city streets empty.

Another bill, sponsored by Councilman Ruben Diaz Sr. (D-Bronx) — who has been showered in taxi industry donations and leads a new committee on the subject — would require a new license for companies handling more than 10,000 trips a day. That would apply to the big names in ride-sharing, like Uber, Lyft, Via and Juno. The cost would be set by the TLC. Other bills from Diaz Sr. would waive license fees for wheelchair-accessible cars, and lower fines on livery drivers caught picking up street hails.

The bill aimed at driver pay, sponsored by Councilman Brad Lander (D-Brooklyn) would require the TLC to set a minimum payment for drivers and would also allow them to study whether to should set a minimum fare.
 Copyright 2018 New York Daily News.  All rights reserved.