The Post-Pandemic Debt Storm: Why Bankruptcy Filings are Surging to 15-Year Highs

Alexander Hernandez 6 min read

Business and consumer bankruptcies continue to surge, with both Chapter 11 reorganization and Chapter 7 liquidation filings showing the rate of filings has increased from last year, as well into late 2025.

By Alexander Hernandez, J.D., Professor, and Author of Consumer Bankruptcy Law (Routledge).

Updated on November 28, 2025.

Listen: The Professor’s Audio Briefing.

Key Takeaways:

Corporate distress continues to escalate. Large company Chapter 11 bankruptcies have hit a 15-year high, driven by high interest rates and inflation.
Consumer debt is hitting record highs. Individual Chapter 7 filings are showing explosive growth, fueled by record credit card debt and the resumption of student loan collections.

A Deeper Dive: The Rise in Bankruptcies Continues

Data from EPIQ, a platform widely used in bankruptcy for lawyers and trustees alike, reveals the concerning trend. Chapter 11 bankruptcies, primarily utilized by businesses, have surged by over 72%, and the trend continues into 2025.

Through October 2025, 655 large corporate firms filed for bankruptcy, nearing the total for all of last year and marking the highest year-to-date total in 15 years.

The post-COVID-19 era has witnessed a significant surge in bankruptcy filings. High-profile companies such as SmileDirectClub, WeWork, Rite Aid, Party City, Bed, Bath & Beyond, and David’s Bridal have all filed for bankruptcy, as they have struggled to adapt to the marketplace.

This trend continues into 2025 with major collapses in the financial and manufacturing sectors, including auto parts giant First Brands Group (with over $10 billion in liabilities) and regional retailers like JoAnn Fabrics, showcasing that no sector is immune.

The rise in bankruptcies extends beyond businesses. Chapter 7 bankruptcies had risen by 19% to 25,627 as of early 2025. That growth continues with personal bankruptcy filings up 16% in September 2025 compared to the prior year. with individual Chapter 7 filings jumping by an astounding 19% in that same period. The rise in bankruptcy filings shows the financial pressure on American households, but even then, bankruptcies will continue to rise because there is a lag. I detail this lag in bankruptcy filings in a prior post.

The Federal Reserve reports these findings, including increased individual bankruptcies, particularly Chapter 7 and Chapter 13 filings. Consumer credit card debt has also reached an all-time high.

The COVID-19 Impact on the $1.3 Trillion Credit Card Debt

During the COVID-19 pandemic, creditors largely refrained from aggressive collections and filing debt collection lawsuits since they realized debtors were likely not earning income or at least less income. So there’s no point in a creditor filing a lawsuit if there’s no way to collect.

This shows the about-face of lenders who failed to be flexible with homeowners during the 2008 mortgage foreclosure crisis. For now, creditors are more open to renegotiating debt, and granting a forbearance on payments has become the norm.

My experience with clients confirms that creditors are willing to provide temporary relief from debt payments for credit cards, mortgages, car loans, and student loans.

A forbearance, which creditors usually grant, typically involves a temporary postponement of payments. However, note that the debt in that period isn’t wiped out but deferred and added to the end of the loan term. For example, a 6-month mortgage forbearance would extend the loan term by 6 months. But when facing financial difficulties, that could be the lifeline you need.

The increase in bankruptcy filings can be tied to creditors resuming debt collection even though many individuals have yet to recover from the coronavirus pandemic’s financial impact. Even my wife and I are experiencing this, as my wife is earning significantly less than before.

The Federal Reserve’s Latest Figures Show an Alarming View of Household Debt

The Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit for the third quarter of 2025 confirms the economic on U.S. households. Total U.S. household debt has surged to a new record of $18.59 trillion.

Credit Card Debt: Balances rose to a record high of $1.23 trillion in Q3 2025. Coupled with average interest rates (APRs) on revolving credit nearing 23%, the cost of servicing this debt is unprecedented.
Student Loan Debt: Total student loan balances reached $1.65 trillion in Q3 2025. As a result, reporting to credit bureaus (Equifax, Experian, and TransUnion) after the pandemic-era pause has caused a massive increase in serious delinquencies.
Delinquency Rates: The flow into serious delinquency (90+ days past due) is sharply increasing in categories most relevant to bankruptcy, notably for student loans, which saw a significant jump in serious delinquency rates year-over-year.

CRITICAL UPDATE: The Current Tipping Point

Creditors’ pandemic relief has ended, and households are now facing aggressive collections while struggling with record debt, high interest rates, and renewed major payments. The rise in bankruptcies can be tied directly to these figures, although there remains a lag, as previously noted.

The increase in consumer filings is driven by three factors:

High Interest Rates: The burden of borrowing means revolving debt (credit cards, HELOCs) and loan payments are consuming ever-larger portions of disposable income.
End of Forbearance: Aggressive debt collection has returned to pre-pandemic levels.
Student Loan Resumption: The restart of federal student loan payments and collections has pushed millions of borrowers over the edge, sending an acute wave of new filers into Chapter 7 liquidation.

The Professor’s Take: Subchapter V and Small Business Bankruptcy

With financial pressures rising, access to bankruptcy relief is crucial. Subchapter V of Chapter 11, a faster and cheaper option for small businesses, was vital during the pandemic when its debt limit was temporarily raised to $7.5 million. That limit has now dropped back to $3.424 million (adjusted for inflation in April 2025).

The success of the higher limit shows its importance, and experts are urging Congress to restore it permanently so more Main Street businesses can reorganize without the high costs of traditional Chapter 11. For Chapter 7, note that the average income for the Means Test is adjusted twice annually. The latest figures for all states can be seen here.

To see this Podcast on YouTube, click here.

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 also listen to my podcast on Spotify.

You can learn more about filing for bankruptcy and the bankruptcy petition via this lin k. 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.

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.

Updated initially on January 8, 2025.

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