The Post-Pandemic Debt Storm: Why Bankruptcy Filings Hit a 15-Year High

The debt and bankruptcy surge I anticipated throughout 2024 has officially made landfall. As we enter 2026, data confirms that both Chapter 11 corporate reorganizations and Chapter 7 liquidations reached levels not seen since the aftermath of the 2008 Great Recession.

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

Updated on January 10, 2025.

Listen: The Professor’s Audio Briefing.

Key Takeaways:

• Corporate Distress: Large-scale Chapter 11 filings hit a 15-year high in late 2025.
• Consumer Hit All-Time High: Total U.S. household debt has peaked at a staggering $18.59 trillion.
• The Student Loan Catalyst: The end of pandemic-era protections and the resumption of aggressive reporting have sent delinquency rates skyrocketing.

A Deeper Dive: The Rise in Bankruptcies Continues

Data from EPIQ, reveals a landscape of significant financial restructuring. Through the end of 2025, corporate filings surged over 72%.

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. Even the luxury brand market is struggling evident by the $100 million default by Saks Global (Saks Fifth Avenue, Neiman Marcus, and Bergdorf Goodman).

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 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.

The Federal Reserve Bank of New York’s latest reports paint an alarming picture of the American household.

Debt Category	Balance (Q3 2025)	Impact Factor
Total Household Debt	$18.59 Trillion	Record high; up nearly $1T in one year.
Credit Card Debt	$1.23 Trillion	APRs nearing 23% have made servicing this debt impossible for many.
Student Loan Debt	$1.65 Trillion	Serious delinquencies (90+ days) have spiked following the resumption of reporting.

CRITICAL UPDATE: The Current Tipping Point

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.

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:

1. High Interest Rates: The burden of borrowing means revolving debt (credit cards, HELOCs) and loan payments are consuming ever-larger portions of disposable income.
2. End of Forbearance: Aggressive debt collection has returned to pre-pandemic levels.
3. 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.

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:

• Bankruptcy
• Insights & Analysis

Please note that the information on this site does not constitute legal advice and should be considered for informational purposes only.

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:

• Bankruptcy
• Insights & Analysis

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.