The Corporate Canary in the Coal Mine: S&P Data Shows Business Bankruptcies Soaring to a 15-Year High

The business pages are flashing red as S&P Global data confirms that U.S. corporate bankruptcy filings are surging, poised to reach their highest level in 15 years. This is a clear sign of persistent economic strain that will inevitably ripple out and reshape the economic landscape for everyday consumers.

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

As a bankruptcy lawyer and law professor, I see this dramatic spike of 655 filings through October, nearly matching all of 2024’s total (687), as proof that rising inflation, high interest rates, and the yo-yo effect of the tariffs are now impacting corporate America.

The Perfect Storm: Why Companies Are Failing Now

The current wave of bankruptcy filings isn’t attributable to a single shock like the Great Recession or the .com era, although an AI bubble has everyone on edge, but a combination of simultaneous economic factors.

• The High-Rate Hangover: Since 2022, the Federal Reserve has raised interest rates sharply, although they have been slowly but surely dropping the interest rates lately to stimulate the economy. For businesses already struggling with tight budgets or heavy debt, these higher costs alone have pushed many into financial trouble.
• The Tariff Uncertainty (As Predicted) Businesses are still wrestling with the uncertainty from shifting tariff policies. What I’ve been calling the yo-yo effect. I predicted this from day one. The changing tariff policies, which have been arbitrary to say the least, have disrupted supply chains and raised costs, putting too much pressure on U.S. manufacturers and retailers already struggling with heavy debt.

Just this week, I posted that tariffs have been imposed against products that we don’t produce, which makes zero sense. If the idea is to force consumers into buying American products, why tax products like bananas or coffee that the U.S. doesn’t produce? Small coffee shops are filing for bankruptcy at record numbers, while Starbucks is closing hundreds of locations and laying off 2,000 employees.

• A Strained Consumer Base: As I have been saying for months, as consumers face higher costs or economic uncertainty, they hold back, which reduces demand and affects businesses. A weakened job market and the uncertainty of AI as companies are laying off employees by thousands, only contribute to this problem.

The Consumer Crisis Meets the Corporate Bankruptcy Crisis

The connection between a company failing and having to file for bankruptcy is connected to the consumer. When a business fails, the chance dramatically increases that its former employees will soon follow suit in filing for personal bankruptcy.

This direct link is confirmed by the parallel data: Consumer bankruptcy filings have also been rising steadily all year, jumping by 15% just last month.

1. Job Losses Lead to Bankruptcy Insolvency: Corporate Chapter 11 filings, even when successful, often involve mass layoffs and operational cuts. When a business files, its former employee is often the next filer on the docket. An employee who loses a job due to a corporate bankruptcy immediately faces lost income, often coupled with medical or other debts, or the loss of health insurance, resulting in seeking relief by filing Chapter 7 or Chapter 13.
2. Credit Market Squeeze: The failures of high-profile companies, like auto parts maker First Brands or subprime lender Tricolor, underscore mounting risk across the global credit market. When lenders get burned on corporate debt, they often tighten lending standards and increase rates for consumers, making it harder for already struggling households to manage their own debt load.

The Professor’s Take

Bankruptcies are surging for both big companies and everyday consumers. S&P reports a 15-year high in corporate failures, and consumer filings jumped 15% last month. This shows we’re deep into a bankruptcy wave.

Here’s the bottom line: Until companies face lower costs and consumers have less debt and higher wages, this bankruptcy trend will keep hitting both company boardrooms and family budgets, especially if subsidies for the Affordable Care Act aren’t extended. Remember, the number one reason for filing for bankruptcy is medical debt and health-related issues. Healthcare is an affordability crisis, and if premiums increase, bankruptcies will continue to surge!

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 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.

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