Gray bankruptcy is referring to those aged 65 and older declaring personal bankruptcy.  It is one of the strongest indicators of consumption patterns that are out of control.  In the U.S. alone, there has been a dramatic increase in personal bankruptcy – even prior to the Global Financial Crisis.  By 2004 the annual filings had reached 1.5 million (1).  Even more concerning was the change in demographics of the filers.  No longer was this a problem experienced by families or business owners.  It had become a problem of the older and retired population.  In fact, those who are older represent the greatest increase in bankruptcy filers (2).

Why is Gray Bankruptcy Increasing?

The greatest increase in personal debt has been in credit card usage (1).  This unsecured debt comes at a steep price.  Since the debt is unsecured it also is charged the highest interest rate, some exceeding 20%.  Individuals who are finding themselves unable to pay off other loans such as home lines of credit will use their credit cards to transfer a debt balance.  This use of one credit vehicle to pay off another is one of the most common signs of deep debt trouble.

The Future of Gray Debt

Gray debt will probably be a big part of the baby boomer retirements.  Based on the boomers’ consumption patterns, it is unlikely that there will be any reduction in debt levels and specifically little decrease in the rates of “gray bankruptcy”.   Baby boomers indicate that they expect to have a more active and luxurious lifestyle than their parents retirement.  This means they need to exceed their parents’ levels of health and wealth in their retirement years (3).  However, the boomers’ spending patterns will make this a highly unlikely outcome.   The stress of debt may also take a toll on their health and well-being.   The hard facts have not yet been faced by the boomers’.  They will find greater challenges in securing new income sources as they age.  A perfect storm of debt may be coming our way with the baby boomers reaching their senior years.


(1)  White, M. J. (2007).  Bankruptcy reform and credit cards.  Journal of Economic Perspectives, 21, 175-199.

(2) Thorne, D., Warren, E., & Sullivan, T. A. (2008).  Generations of Struggle.  AARP, #2008-11, June 2008.

(3) Manchester, J., Weaver, D., & Whitman, K. (2007). Baby boomers versus their parents: economic well-being and health status.  In Madrian, B., Mitchell, O.S., & Soldo, B.J. (Eds).   Redefining Retirement: how will boomers fare? pp 112-137. New   York,NY: Oxford University Press Inc.