For some, bankruptcy is a savvy financial maneuver that allows restructuring of debt and institutes a repayment plan that can open more doors than it closes. For others, it’s the end of the line, with the bankruptcy process serving as the final steps before the closing of a small business or personal insolvency. Either way, the number of filers continues to expand.
According to bankruptcy statistics released by the Administrative Office of the U.S. Courts, filings for both business bankruptcies and personal bankruptcies increased by over 11% over the year ending on June 30, 2025. Perhaps indicating that this financial trend is showing no signs of slowing down, the American Bankruptcy Institute (ABI) revealed data showing a 12% increase in bankruptcy cases in October 2025 compared to the same month in the previous year.
The increased total bankruptcy filings include both Chapter 7 and Chapter 13. Are creeping bankruptcy rates a harbinger of a lurking recession, or just a hiccup due to planned reorganizations and liquidations? Let’s take a look.
Bankruptcy Is the Great American Story Rewritten
In its simplest definition, bankruptcy is a court procedure that provides debt relief through reorganization or discharge. If completed, the person or business will have a fresh start, albeit with a record of bankruptcy on their credit report and, depending on the type they opted for, the possibility that many of their assets may have been sold off.
There are six different types of bankruptcy available, with most classified under reorganization or liquidation. The two most common versions are Chapter 7 and Chapter 13 bankruptcy. While individual filings can be under either of these, business filings cannot be made under Chapter 13 unless the filer is self-employed or a sole proprietor.
Chapter 7 filings focus on the liquidation of assets to satisfy as many of the outstanding debts as possible. Secured debts carry priority for satisfaction. Chapter 7 non-business filings may eliminate unsecured debt, such as medical bills and credit card debt. To be eligible for Chapter 7 bankruptcy, filers must pass a means test to demonstrate that they lack sufficient income to opt for a Chapter 13 bankruptcy instead. Some debts, such as student loans or court-ordered child support, cannot be discharged through a Chapter 7 bankruptcy.
Instead of eradicating outstanding debt and leaving a stain on a credit record that persists for years, Chapter 13 bankruptcy restructures the owed money into a payment plan that requires monthly payments for between three to five years until the debt repayment plan is satisfied. Being approved for a Chapter 13 plan can help prevent foreclosure and other asset seizures, but filers must meet specific income requirements to be eligible.
Regardless of whether a bankruptcy is filed by a business or an individual, it’s a forgone conclusion that at least one bankruptcy attorney should be hired. BigLaw firms often have entire departments dedicated to handling bankruptcy cases, with the recent year-over-year increase in filings keeping them busy. But what’s driving the greater number of bankruptcy filings?
No Longer Burdened by Material Things
In the aftermath of the Great Recession, bankruptcy filings hit almost 1.6 million in 2010. Compared to that, the 570,000+ filed between June 2024 and 2025 sounds like a great improvement. However, it denotes an increase of over 160,000 filings over 2022’s total. 2025 has seen corporate bankruptcies filed by previously successful companies, such as 23andMe Holding, P. Judge & Sons, JoAnn Fabric, Hooters, and Del Monte. Key elements of their downfall include high interest rates, supply chain disruptions, and weakened consumer demand resulting from inflation.
The financial pressures have been no easier on individuals laboring under household debt. Consumer bankruptcies jumped by over 50,000 from last year. Consumer debt was impacted by rises in the cost of living, persistent inflation, and job losses. The cancellation of most of the federal student loan relief programs also contributed to the financial distress of many. Approximately 60% of the bankruptcy filings were Chapter 7 cases, with the remainder primarily consisting of Chapter 13 reorganizations.
With inflation and affordability remaining ongoing concerns for many Americans, bankruptcy filings are likely to continue trending upwards. For those who find themselves at the end of their financial rope, speaking with a bankruptcy attorney can help clarify what to expect and possibly present alternatives that haven’t been considered.
Related Resources
- What Happens After You File for Bankruptcy? (FindLaw’s After Bankruptcy)
- Chapter 13 vs Chapter 7 Bankruptcy: Which Is Right for Me? (FindLaw’s Bankruptcy Law)
- Student Loan Repayment Costs Likely To RISE as Federal Rulemaking Group Considers Proposals (FindLaw’s Law and Daily Life)
