Why US bankruptcy filings increased in the second half of 2025?

US bankruptcy filings increased in the second half of 2025 mainly because high interest rates, persistent inflation, and the unwinding of pandemic-era supports squeezed both household budgets and business cash flows at the same time. Rising consumer debt and mounting delinquencies, along with sector-specific corporate weaknesses, converted this financial strain into a visible jump in both personal and business bankruptcies.​

Core macroeconomic pressures

Elevated interest rates raised borrowing costs on credit cards, auto loans, business credit lines, and existing variable-rate debt, making it more expensive to service obligations and refinance. At the same time, stubborn inflation in essentials like food, housing, and fuel kept real household purchasing power under pressure, as wage gains did not fully keep up with price increases.​

Pandemic-era buffers such as stimulus savings, loan forbearance, and expanded safety nets had largely been exhausted or rolled back by 2025, removing a cushion that had suppressed filings in earlier years and leaving more borrowers exposed to shocks.​

Consumer debt and household strain

Consumer bankruptcy growth in 2025 is closely tied to record or near-record levels of household debt, especially revolving credit and resumed student loan obligations. By mid‑2025, credit card balances had climbed above 1.2 trillion dollars, with delinquency rates rising into double digits and particularly acute stress among lower‑income households.​

Many households increasingly relied on credit cards to cover gaps between income and rising living costs, which led to spiraling interest charges and, eventually, inability to meet minimum payments, collections activity, and bankruptcy filings in the second half of the year. The restart or tightening of student loan repayment requirements further raised monthly outflows, turning routine setbacks like medical expenses or car repairs into tipping points for insolvency.​

Business and corporate factors

Business bankruptcies also rose as companies faced higher interest costs, tighter lending standards, and softer demand in discretionary and interest‑sensitive sectors. Sectors such as retail, casual dining, and certain services saw an accumulation of distress that began in 2024 and continued into 2025, with large corporate bankruptcies reaching their highest levels in around 15 years.​

Higher financing costs reduced the viability of highly leveraged or marginally profitable firms, while changing regulations and input costs added further pressure in areas like energy and trade‑exposed industries. As credit conditions tightened, more businesses turned to Chapter 11 and other restructuring tools rather than being able to roll over or amend debt out of court.​

Business vs. personal drivers

Statistical picture in late 2025

For the 12‑month period ending September 30, 2025, total U.S. bankruptcy filings were up about 10 to 11 percent from the prior year, with non‑business cases rising more sharply than business cases. Court data and legal-industry trackers report total filings in the mid‑500‑thousand range for that period—well above the lows reached after pandemic support, though still below post‑2008 peaks—confirming that the acceleration in the second half of 2025 marks a meaningful but not yet systemic wave.​