Mom and Pop Small Businesses Reach Record High in Bankruptcy Filings

Small business bankruptcies are surging under the Trump administration.  

The headlines this morning from Bloomberg confirm what I’ve been stating all year, that bankruptcies would surge because of the Trump administration’s policies. Bankruptcies would increase across the board, from large corporations to consumers, farmers, and mom-and-pop businesses. Unfortunately, that is exactly what has happened.

“Mom-and-Pop” business bankruptcies have reached a record high. As the end of 2025 is near, the data confirms the reality for the small business owner that bankruptcy is defining their future.

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

Key Takeaways:

• Record High Bankruptcies: Mom‑and‑pop businesses are filing for bankruptcy at unprecedented levels as 2025 ends.
• Across‑the‑Board Bankruptcy Surge: Corporate, consumer, small business, and farming bankruptcies are all rising simultaneously.
• Tariff Pressure on Small Businesses: Tariff‑driven import cost increases of 25%–60% are crushing small operators who lack the financial ability to absorb them with short term losses.
• Corporate Bankruptcies Spike: Large companies are filing at their fastest pace since 2010, signaling deep structural economic stress.
• Household Financial Strain: High interest rates, resumed student loan payments, and record consumer debt are driving individual bankruptcy filings upward.
• Farmers in Crisis: Chapter 12 filings are climbing as trade policies limit export markets and key support programs are reduced or eliminated.
• The 2025 “Perfect Storm”: Rising costs, shrinking margins, and policy decisions have created a financial environment that small businesses cannot withstand.
• Layoffs Foreshadow More Filings: With 1.17 million layoffs this year, a new wave of consumer bankruptcies is likely in 2026 due to the typical financial lag.
• Everyday Signs of Economic Stress: The rise of extreme financial products like 50‑year mortgages and 100‑month car loans signals an economy under severe strain.

The Bankruptcy Surge Across the Board

I’ve been talking about the “perfect financial storm” for a while now. When it comes to small businesses, the tariff policies put the squeeze on mom-and-pop businesses that cannot absorb a 25% or 60% increase in import costs, unlike major corporations.

Corporate bankruptcies have hit their highest pace since 2010. Individual filings have surged all year. Families are being squeezed by a combination of high interest rates, the resumption of student loan payments, and the rising cost of living. Consumers will begin the New Year with a record high of credit card and household debt. Recently, I wrote an article based on the Tax Foundation stating that “The Trump tariffs are the largest US tax increase as a percent of GDP in over 30 years.”

But as predicted, the farming industry is facing the same financial troubles.

Farmers and Chapter 12 Bankruptcy

Chapter 12 bankruptcy filings are climbing again. For the American farmer, the 2025 trade environment has made it impossible to find profitable markets for their exports because of the self-imposed tariff war. Recently, the Trump administration claimed that because of tariffs, they are able to provide a $12 billion bailout for farmers. That is simply a false statement. Not only is the tariff war to blame, but also the elimination of key programs that help farmers offload their surplus, such as USAID and Food for Peace.

Meanwhile, farmers are stating that it is not enough to cover the losses; the fact is, we experienced this already during the first Trump administration with tariffs, farmers, followed by a bailout.

The “Perfect Storm” of 2025

Unlike a major corporation with an army of trade attorneys and the scale to renegotiate supplier contracts, a local shop cannot simply “absorb” a 25% or 60% increase in import costs. For small businesses, these tariffs have turned their slim margins into immediate deficits, followed by increasing debt.

What to Expect Next Year?

Looking ahead, I predict a wave of massive layoffs as corporations prioritize AI over their employees. This year, we’ve already seen layoffs surge to 1.17 million, a level we haven’t neared since the 2 million record set during the COVID-19 era.

Unfortunately, history shows us that where layoffs lead, bankruptcy filings follow. Keep in mind that there is often a “lag” in this data, as it typically takes several months, if not a full year, for an individual to exhaust their savings or max out their credit cards before filing for bankruptcy.

One thing is for sure: no matter how often you’re told the economy is “buzzing” or that prices have dropped by some mathematically impossible percentage that exceeds 100%, your eyes don’t lie. Your checking account and your credit card statements tell the truth every time. After all, if the economy were truly healthy, why would we be hearing serious proposals for 50-year mortgages and 100-month car loans? Those aren’t signs of a healthy economy, but desperate tools to prop up an economy that is falling apart.

Are you ready for a financial storm heading into 2026?

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.

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.