Freedom from indebtedness has become harder and harder for seniors to achieve in recent years thanks to increases in heath care and other costs. Compounding the problem is the economic recession and market collapse which has shrunk most seniors’ asset portfolios and made employment for this group harder to find.

A complete lack of debt is not a requirement for retirees–in fact, some are content to pay mortgages they have well in hand, while others prefer to use credit or loans for purchases such as second homes, vehicles or expensive vacations. This trend toward more debt for seniors is cause for concern, however, and the admonition remains for seniors on fixed incomes to stay away from heavy debt.

Debt counseling offices, such as the Consumer Credit Counseling Service of the Black Hills, in Rapid City, S.D., see a steady stream of older people who have taken on too much debt. Here, women in their 70s and 80s attend required counseling sessions while they prepare to file for bankruptcy.

Terry Mills, a manager at the center, has seen hundreds of retirees file for bankruptcy and says seniors make up the largest demographic group at the center. Many are in their current situation, at least in part, due to medical bills. “It’s very sad. They worked their whole lives and here they come and they have to file bankruptcy — this is how you end your life. It just tears your heart out when people come in here on walkers,” says Mills.

The 55-and-older demographic group now holds the top spot in bankruptcy filings, accounting for 23 percent of the more than one million filings in 2007, according to the AARP. Older seniors are most vulnerable, with bankruptcy more than quadrupling in the 75- to 84-year-old group. Those seniors who have not yet filed for bankruptcy carry a troubling large amount of mortgage and credit card debt.

According to the Employee Benefit Research Institute, 43 percent of seniors age 65 to 74 carried a mortgage in 2007 and had a median housing debt of $69,000, up from 32 percent in 2004 and 18 percent in 1992. Credit card debt, in particular, is an increasing problem for seniors of modest means. A 2008 study of low- and middle-income seniors by the New York think tank Demos found an average of $4,000 in credit card debt for medical expenses alone.

Well-off seniors are also feeling pinched. An example is Ginnie Curran, 65, a retired teacher from San Diego, Calif., who always expected to live debt-free in retirement. As she prepared to retire in 2003, she envisioned annual vacations to New York and Hawaii.

But unforeseen circumstances have chipped away at her holdings: her investment portfolio dropped 30 percent at the beginning of the decade, not long before she retired; the condo she bought for $580,000 in 2005 is now worth 10 percent less; and she must pay an $1,800-per-month mortgage. Despite a monthly post-tax income of $4,200 from her teacher’s pension, expenses from home repairs to medical care prompt her to run up her credit card, which she must then sell stocks in order to pay.