Bankruptcy Filings Are Rising: What Does That Actually Mean?
Bankruptcy Filings Are Rising: What Does That Actually Mean?
Bankruptcy filings are going up across the United States. That may sound alarming, but the numbers need some explanation. An increase in bankruptcy cases does not automatically mean that everyone is in financial trouble, and it certainly does not mean that bankruptcy is the right choice for every person who is struggling with debt.
According to the Administrative Office of the U.S. Courts, 608,511 bankruptcy cases were filed during the 12 months ending June 30, 2026. That is a 12.2% increase from the same period a year earlier. Business bankruptcy filings increased even more, rising 16.9% to 26,941 cases.
Those numbers are worth paying attention to. But they do not tell the whole story.
Why Are More People and Businesses Filing Bankruptcy?
There is no single reason. When people come to me to talk about bankruptcy, I find that the problem often developed over time. Someone may have lost a job or had their income reduced. Medical bills may have accumulated. Credit-card balances may have become difficult to manage. A lawsuit, tax debt, divorce, mortgage problem, or unexpected family expense may have made an already difficult situation worse.
Business owners face many of the same pressures. A business can be profitable for years and then suddenly struggle because of lower sales, rising expenses, unpaid customers, tax problems, loans, leases, or other obligations. And a new reason has recently popped up: tariffs.
Sometimes several of these problems happen at the same time. That is why national bankruptcy statistics can give us useful context, but they cannot explain why any particular person or business decides to file.
Bankruptcy Is Not a Sign of Failure
Many people are embarrassed to even ask about bankruptcy. I understand that.
You should know that bankruptcy is a legal process created to address financial problems in an organized way. It is not a judgment about someone’s character or how hard they have worked.
Different types of bankruptcy are designed for different situations.
Chapter 7 allows eligible individuals to eliminate certain debts and businesses to conduct an orderly wind down of affairs.
Chapter 13 allows individuals with regular income to reorganize their debts and make payments through a court-approved plan, generally over three to five years.
Chapter 11 is often used by businesses that need to reorganize their financial obligations, although individuals may use Chapter 11 in certain circumstances as well. More recently, the rules around Chapter 11 have changed, providing smaller businesses with a greater likelihood of success at a lower cost.
The important question is not simply, “Can I file bankruptcy?”, but “Would bankruptcy actually help me?”
Waiting Often Limits the Available Choices
One mistake I often see is waiting until the situation becomes an emergency.
A person may ignore collection letters until a lawsuit is filed. A homeowner may wait until a foreclosure is already moving forward. A business owner may continue borrowing money in the hope that things will improve, often at extremely high interest rates.
Talking to a bankruptcy attorney does not mean that you have decided to file bankruptcy. It simply gives you an opportunity to understand what options may be available.
In some situations, bankruptcy makes sense. In others, there may be another way to deal with the problem.
Your Situation Matters More Than the National Numbers
Two people can owe the same amount of money and still have very different options.
Your income, assets, type of debt, home equity, tax obligations, business interests, previous bankruptcy filings, and financial goals can all affect what makes sense for you.
The same is true for business owners. One company may benefit from restructuring, while another may need a completely different approach.
So while the rise in bankruptcy filings is important, it should not make the decision for you. What matters most is understanding your own financial situation and the choices available to you.
At Moretsky Law, I work directly with individuals and business owners who are dealing with debt, tax problems, and financial difficulties. My goal is to understand what is happening, explain the available options clearly, and help you make an informed decision about what to do next.
This article is for general informational purposes only and is not legal advice. Every financial and bankruptcy situation is different.