U.S. Bankruptcy Filings Soared in 2025

Bankruptcy filings climbed 11% in 2025 as consumers and businesses grappled with the weight of high borrowing costs and the erosion of pandemic-era financial buffers.

Bankruptcy filings in calendar year 2025 reached 565,759 — an 11% increase over the 508,953 cases recorded in 2024, according to data released by Epiq AACER and the American Bankruptcy Institute (ABI). While the 2025 increase remains well below the 1.6 million peak from 2010, the steady growth suggests that the era of post-pandemic suppressed filings has effectively ended.

The primary driver of this shift is the consumer sector. Individual filings rose 12% in 2025, reaching 533,949. Notably, Chapter 7 liquidations jumped 15%, a metric often viewed as a barometer of acute financial distress.

Amy Quackenboss, executive director of the ABI, noted in a Jan. 6 statement that “elevated borrowing costs, persistent inflation, and geopolitical uncertainty have more families and businesses seeking a financial fresh start.”

The increase in filings aligns with broader credit trends reported by the Federal Reserve Bank of New York. In late 2025, total household debt hit $18.59 trillion. While mortgage delinquency rates remain relatively stable, stress is localized in credit cards and auto loans.

“Year over year, we observed double-digit growth in bankruptcy filings, and December’s results highlight a sharp acceleration as volumes continue to normalize toward prepandemic levels and a return to more typical economic pressures,” said Michael Hunter, vice president of Epiq AACER. “December’s 21% rise in consumer filings — driven by a 24% increase in Chapter 7 and 17% in Chapter 13 — signals the momentum we expect to continue into 2026 as consumers and businesses in distress seek bankruptcy for protection.”

On the commercial side, total filings rose 5% in 2025. However, the Subchapter V category, designed for small business reorganization, grew by 11%. This indicates that while large-scale “mega-bankruptcies” haven’t flooded the courts, small businesses are feeling the pinch of tighter credit conditions and the end of COVID-era support programs.

ACA’s Take

Recent litigation, such as the case of In re: Morton Craig Skaggs in the Western District of Virginia, reminds agencies that even good-faith errors in collecting discharged debt can result in sanctions. The court emphasized that the bankruptcy discharge is a “broad, powerful, and unambiguous” injunction.

Furthermore, the ARM industry is closely watching the “discharge gap” in student loans. As reported by ACA International earlier this month, the evolving standards for “undue hardship” are making student debt increasingly susceptible to discharge.

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