US bankruptcy cases steadily increase

(CN) — In his classic 1926 novel “The Sun Also Rises,” Ernest Hemingway says you go bankrupt in two ways — gradually, then suddenly.

Likewise, the hundreds of thousands of U.S. businesses and households that declared bankruptcy over the last year represent struggles both individual and national, adding up to a 10.6% increase in filings, according to data published by the Administrative Office of the U.S. Courts on Monday.

While the courts processed 504,112 bankruptcies throughout 2024, the workload increased to 557,376 new filings over the last year.

Large corporate collapses in 2025 included a bleed out of Rite Aid, the folding of JoAnn, the degeneration of Forever 21, the fallout of Hooters, and the extinction of 23andMe. In all, 24,039 businesses declared bankruptcy last year, up 5.6% from 2024’s loss of 22,762 businesses.

An economic safety net for discharging debt, bankruptcy is often seen as a strategic move for businesses. The process can also hit individual households more severely, with 533,337 people filing for bankruptcy last year, up 10.8% from 2024’s 481,350 individuals.

Most people — 333,321 — filed for Chapter 7 bankruptcy, liquidating assets, while 200,290 filers opted for Chapter 13, which establishes a repayment plan for debt.

Experts at the American Bankruptcy Institute pointed to macroeconomic trends as contributing to increases in individuals declaring bankruptcy, including renewed student loan collection efforts and the increasing costs of living.

“Persistent economic headwinds — including higher prices, tighter lending conditions and ongoing geopolitical uncertainty — continue to weigh on financially distressed consumers and businesses,” said Amy Quackenboss, executive director for the American Bankruptcy Institute, in a statement.

Still, Quackenboss sees the legal process as helping Americans start anew.

“Bankruptcy remains an indispensable tool to help debt-burdened families and businesses achieve a financial fresh start,” Quackenboss said.

Belisa Pang, an assistant law professor at the University of Michigan, cautions against attributing recent news headlines to recent rises in bankruptcy rates, which tend to lag behind long-term changes.

“People wait a long time before filing bankruptcy,” Pang said in a phone interview. “People mistakenly think about what happened yesterday, but bankruptcy reflects things that happened years ago.”

Much of Pang’s research focuses on unearthing micro-trends buried in large data sets, like the fact that mothers with children find relief less often through bankruptcy compared to people without dependents and that a larger portion of people are declaring subsequent bankruptcies today than in past years. More research is needed to determine whether these observations reflect better access to the bankruptcy system or highlight overlooked vulnerabilities in the system or among filers.

In addition to who files for bankruptcy, Pang is interested in who doesn’t.

“A lot of people who are suffering don’t seem to be seeking bankruptcy,” Pang said. Some academics point to stigma driving people away from filing for bankruptcy; others consider it a sign of barriers to access, like attorney fees or understanding the process. Pang said, “We just don’t know.”

Putting today’s bankruptcy rates into context, Pang pointed out that rates of filers are still well below what they were before the pandemic. In 2005, more than 2 million people and businesses declared bankruptcy. From 2010 until 2022, bankruptcy rates had consistently trended downward in the U.S. but remained well above the half-million mark. Between 2015 and 2019, the rate stabilized in the 700,000 range.

The lowest rate over the last 15 years was actually in 2022, which saw just 380,634 filings, including 13,125 businesses and 370,685 non-business filings. In all, 2022’s rate was about a third lower than today’s, and business bankruptcies were half of what they are today.

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