Bankruptcy Filings Rise: Trends & Predictions
By Alexander Hernandez, J.D., Professor, and Author of Consumer Bankruptcy Law (Routledge).
Updated on October 2, 2025.
Bankruptcy filings for individuals and businesses continue to increase. Overall, bankruptcy filings increased to 16.8 percent with business and non-business bankruptcies. It’s my prediction that this trend will continue over the next twenty-four months.
Key Points:
- Bankruptcy filings have risen for businesses and individuals./
- Chapter 7 and Chapter 13 are the most common types of bankruptcy filings for individuals.
- Bankruptcy filings are likely to continue to increase in 2024 and 2025.
For the year ending in 2023, the number of bankruptcy filings has been increasing steadily, yet it is still lower than its last peak in December of 2010. Why did bankruptcy filings increase in 2010? Before we get into that issue, let’s review the different bankruptcy chapters.
What Are the Different Chapters in Bankruptcy
There are several Chapters in bankruptcy. Chapter 7 is the most common type of bankruptcy filed. It is known as a liquidation and can be filed by an individual or business.
Chapter 13 is the second most common type of bankruptcy filed and applies to individuals only. It is known as a reorganization or wage earner’s plan since the debtor must earn income to qualify. Chapter 13 requires a payment plan with the bankruptcy court that lasts between three to five years.
Chapter 11 applies to individuals and businesses but is usually associated with businesses. The way I describe it to my students is that Chapter 11 is similar to Chapter 13, but it involves more debt and more assets. Chapter 13 has a maximum debt limit of $2,750,000 for unsecured debt, while secured debts cannot exceed $1,395,875. If those limits are exceeded, a debtor must proceed with Chapter 11.
Chapter 9 bankruptcy applies only to municipalities. It is, of course, a rare form of bankruptcy. The city of Detroit filed the largest Chapter 9 bankruptcy in July of 2013 for an estimated $18-$20 billion in debt. Alabama’s Jefferson County had the second largest Chapter 9 bankruptcy filing in 2011, with an estimated $4 billion in debt.
Chapter 12 bankruptcy is a particular type of bankruptcy that applies only to farmers and fishermen. Chapter 15 bankruptcy is known as a cross-border case, which refers to a foreign business that also has business within the United States.
Bankruptcy Filings in 2023
The Administrative Division of the U.S. Courts recently released bankruptcy filing statistics. The total amount of bankruptcy cases filed in 2023 was 452,990. That is 65,269 more bankruptcy filings than in 2022, which had 387,721 cases.
Business bankruptcy filings increased from 13,481 to 18,926, more than a forty percent increase. Individual bankruptcy filings increased from 374,240 to 434,064 when comparing 2022 to 2023.
Bankruptcy Filings in 2010
The peak for bankruptcy filings was in 2010, with approximately 1.6 million cases. Why was there such a large amount of bankruptcy filings in 2010? Remember, that was after the mortgage foreclosure crisis.
This was caused by subprime mortgage lenders where homeowners that normally wouldn’t qualify for a mortgage, were approved because of the deregulation of the mortgage industry and Wall Street.
To qualify individuals for a mortgage, lenders use ARMS or Adjustable Rate Mortgages, which means the monthly mortgage payment is at a lower rate initially, usually three to five years, and then increases.
A typical example is an interest-only mortgage, which only includes interest versus the principal payment. After that time period ends, the mortgage adjusts to include the principal, and payments will increase substantially.
Because mortgages were being given out so freely, housing prices soared. Still, once those adjustable-rate mortgages came due and homeowners couldn’t afford the new mortgage payment, the houses went into foreclosure, reducing the value of real estate.
The Housing Bubble
Once home values dropped, the housing bubble burst, and we heard the term underwater mortgages for the first time. This meant that more money was owed on the mortgage than the house was worth—a rare event in the housing market for the United States.
My home, like millions of other homeowners, was also underwater. I voluntarily let my house go into foreclosure because it no longer made financial sense for me to be living in a large home.
Before that, because home values had increased drastically, so did my taxes and insurance, causing my mortgage payments to rise. I was trying to sell my home then, but after hurricanes Katrina and Wilma caused substantial damage to my house, the housing bubble had burst by the time repairs were completed. So, it was time to walk away.
What Does the Future Hold for Bankruptcy Cases
It has always been my opinion that in 2024 and 2025, there will be a substantial increase in the number of bankruptcy cases filed. I have written about my prediction many times in prior blogs.
My prediction is based on the fact that during the COVID-19 pandemic, creditors were not aggressively pursuing lawsuits against debtors who had defaulted on their credit cards. The reason was always simple: why bother suing someone if you know they don’t have the money to pay?
However, creditors are running out of time to file lawsuits because of the statute of limitations, which is the maximum time allowed to file a lawsuit. Most states’ statute of limitations for lawsuits is between four to five years.
Because of that, that is why after the coronavirus pandemic, we are seeing an increase in bankruptcy filings and defaults on credit cards.
Professor Hernandez is an attorney specializing in consumer finance and debt relief. He is the published author of Consumer Bankruptcy Law (Routledge Publishing) and teaches law and finance courses in both English and Spanish for an international university.
Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. Paralegals and students who are buying single copies can do so via Amazon Books. To access my YouTube channel, click this link.
You can learn more about filing for bankruptcy and the bankruptcy petition via this link. Information on the bankruptcy court system, contact information for trustees, and your state’s exemptions can be found here. The federal bankruptcy exemptions are listed here. The latest version of the 341 Meeting of the Creditors can be found here.
You can find additional categories by clicking below or by using the search feature at the top of this page:
Please note that the information on this site does not constitute legal advice and should be considered for informational purposes only.
Discover more from Bankruptcy.Blog
Subscribe to get the latest posts sent to your email.
You must be logged in to post a comment.