As economic headwinds intensify, the number of Americans seeking relief through bankruptcy is climbing to levels unseen in years. This article explores the forces propelling this trend and the sectors most at risk.

Shifting Tides: A Surge in Bankruptcy Cases

In the 12 months ending March 31, 2025, overall U.S. bankruptcy filings rose 13.1% compared to the prior year, reaching 529,080 cases. Both business and non-business filings climbed significantly: business bankruptcies increased 14.7%, while non-business filings surged 13%.

This marks a continuation of a broader uptick that began after a decade-long decline. Following a spike in 2023—when filings jumped 16.8%—each quarter of 2024 and early 2025 has seen persistent growth in cases across Chapters 7, 11, and 13.

The Sectors Under Strain

Some industries have felt the strain more acutely than others. Manufacturing, services, and retail sectors lead the increase, driven by thin margins and rising costs.

Service sector bankruptcies now account for nearly a third of all filings, up sharply from historical norms. Retail and manufacturing operators, squeezed by supply chain disruptions and tariffs, have also sought Chapter 11 relief in growing numbers.

Household Stress and Consumer Debt

Beyond businesses, American families are reaching breaking points. Tighter budgets and increased borrowing costs have fueled record arrears and delinquencies.

• Credit card balances reached $1.21 trillion, the highest level ever recorded.
• Subprime auto loan delinquencies approach 7%, reflecting rising financial stress.
• Share of households over 90 days late on payments is at a 14-year high.

This environment has driven up Chapter 7 liquidation filings by nearly 20% year-to-date, while Chapter 13 consumer restructurings rose by over 8%. Many borrowers find that mounting interest costs outpace their earnings, forcing them to file bankruptcy as a final recourse.

Economic Drivers Behind the Trend

Experts point to several macroeconomic factors fueling the surge. Persistent cost pressures from inflation and higher interest rates for loans have amplified debt burdens for both businesses and consumers.

• Rising consumer price inflation erodes purchasing power.
• Higher borrowing costs increase debt servicing obligations.
• Expired pandemic-era protections removed financial safeguards.

For small businesses, the expiration of expanded debt limits under Subchapter V has meant fewer simplified bankruptcy options, pushing some enterprises toward more complex Chapter 11 proceedings.

Unfinished Safety Net: Policy Challenges

Bankruptcy remains a crucial safety valve, but policy gaps risk leaving vulnerable groups without adequate protection. Recent changes to eligibility thresholds for Chapter 13 have excluded many moderate-income households.

Key policy issues include:

• Adjusting debt limits to ensure families can access relief.
• Strengthening consumer protections against predatory lending.
• Expanding streamlined routes for small business reorganizations.

Without timely reforms, millions of Americans could face limited options to restructure or discharge debts, exacerbating social and economic divides.

Looking Ahead: Navigating Uncertain Waters

Although current bankruptcy levels remain far below the peaks of the Great Recession, the upward trajectory underscores deep vulnerabilities. The coming months will reveal whether policymakers can balance creditor interests with the urgent needs of households and small enterprises.

For businesses, strategic cost management and careful debt structuring may offer pathways to survival. Consumers, meanwhile, should explore counseling services, budget adjustments, and negotiation with lenders before opting for formal filings.

Ultimately, the rise in bankruptcies signals more than financial duress—it highlights the human cost of a system under strain. By addressing root causes and shoring up support mechanisms, stakeholders can help pave a more resilient road forward for vulnerable sectors and the families they serve.