Introduction
As the economic landscape continues to weather an array of unprecedented disruptions, understanding the conditions around bankruptcy risk is critical for financial professionals and compliance teams.
The interplay between shifting financial conditions, regional disparities, and long-term affordability challenges is having a significant impact on consumers and commercial enterprises across the United States.
In this report, we will examine 2025 bankruptcy data to identify emerging patterns in bankruptcy filings, to offer an informed perspective on the forces that continue to shape this risk segment well into 2026.
Structural and Regional Shifts Tell a Story
Our analysis of nationwide consumer and commercial bankruptcy data indicates there’s more to the story than just a rebound in filings since the end of the pandemic relief. It’s true that bankruptcies have continued to increase since 2022, but a closer read of the data suggests something more structural than cyclical.
The more nuanced story for lenders, creditors, and risk professionals is that bankruptcy risk is becoming more segmented, regional, and embedded in long-term cost and affordability dynamics.
Consumer Filings Are the Main Driver of Increased Bankruptcies
At a high level, one of the key storylines in the 2025 data is that the increase in filings was overwhelmingly driven by consumers. Overall, consumer filings grew 11.5% in 2025.
Of the year-over-year increase, approximately 80% of consumer filings were Chapter 7. Chapter 7 is the most common type of bankruptcy and is typically undertaken by consumers without the income to realistically repay their debts. In Chapter 7 bankruptcy, non-exempt assets are liquidated and used to pay creditors.
Chapter 13 filings also increased by 5.6% in 2025. Where Chapter 13 differs from 7 is through a debt repayment plan for filers with regular income, which does not involve liquidating assets. Chapter 13 structures repayment over three to five years, after which, qualifying debts may be discharged.
The increase in Chapter 13 in addition to Chapter 7 filings shows that financial stress has crept beyond the most distressed consumers into households with regular income.
From a credit risk perspective, the 2025 bankruptcy data is telling a bigger story about Americans’ household finances. There appears to be an ongoing depletion of liquidity and limited ability to repay unsecured debt. In addition, the growth in Chapter 13 signals affordability challenges among working consumers.
Business Bankruptcies Were Contained, but Structurally Elevated
Chapter 11 filings, which allow businesses to reorganize their debts, increased a modest 3.6% in 2025 and were not a material driver of the growth in filings. Still, the data here deserves a closer look.
The total Chapter 11 filings of 8,952 in 2025 were 38.5% above the 2018–2019 pre-pandemic average of 6,465 filings. Even though year-over-year growth was modest, the current level remains structurally higher than historical norms.
This suggests that the pressure on businesses to restructure debts may not be cyclical in the traditional sense. Instead, it seems to be more strongly linked to sustained higher interest rates, elevated costs, tighter credit conditions, and the systemic changes to business’ operating models after the pandemic.
For commercial lenders, the takeaway right now is not an imminent acceleration in business bankruptcies, but the potential ongoing need to restructure risk in certain industries.
Distinct Patterns in Consumer and Business Filings
It’s important to note that despite the continued upward trend in consumer bankruptcy filings in recent years, there has yet to be a return to pre-COVID volumes. In fact, total filings remain about 25% below the 2018–2019 average. By chapter:
- Chapter 7 remains roughly 25% below pre-pandemic levels.
- Chapter 13 remains approximately 28% below pre-pandemic levels.
On the other hand, the Chapter 11 filings used more commonly by businesses exceed pre-pandemic averages by nearly 40%. The divergence in the two patterns seems to point towards two takeaways:
- Consumer financial stress is rising but has not yet normalized to historical averages.
- Business restructuring activity is elevated relative to prior baselines and may reflect longer-term structural pressure.
Bankruptcy risk has recovered unevenly in the years since pandemic relief programs ended. For lenders and creditors, traditional benchmarks based on historic averages may understate the potential risk in commercial portfolios while overstating what may be normalization on the consumer side.
Regional Bankruptcy Trends
The regional patterns of bankruptcy concentration tell yet another story. Nearly half of the total consumer filings in the US came from two of the country’s eight regions: the Southeast and Pacific.
- The Southeast added 17,527 filings, accounting for 31.0% of national growth.
- The Pacific region added 10,053 filings, contributing 17.8% of the increase.
Moderate growth occurred in the Southwest (+9,350) and Mountain (+4,220) regions. The remaining regions contributed significantly less to national growth and remain further below pre-pandemic averages.
For national lenders, this geographic asymmetry is important. Bankruptcy exposure isn’t broad and uniform, but more regionally concentrated and uneven. As a result, lenders may consider segmenting portfolios by region and adding potential regional economic risk drivers into their future risk models, such as housing costs and consumer debt mix.
What the Outlook Suggests for Financial Institutions
Based on our analysis of 2025 data, combined with third-party bankruptcy analysis for the 2026 outlook, the directional signals seem to be toward stabilization rather than acceleration. As we see it, there seems to be normalization underway toward new structural conditions.
In prior cycles, bankruptcy management often centered on reacting to broad-based spikes, but the 2025 data indicates a different mix of current factors:
- Risk is consumer-led.
- Growth is regionally concentrated.
- Business restructuring is structurally elevated, but not rising explosively.
- National consumer totals remain below pre-pandemic norms, but in some areas, this can mask more serious localized issues.
Instead of reacting to cycles, financial institutions should embed bankruptcy risk into long-term strategy, and that means prioritizing:
- Adjusting underwriting to reflect uneven consumer stress and structurally higher commercial exposures.
- Differentiating risk by region, chapter and borrower profile.
- Evaluating geographic concentration.
- Ensuring operational readiness for the effective management of bankruptcy workflows.
By pairing risk analysis with operational readiness, institutions can move to a more strategic approach to bankruptcy risk in 2026 and beyond.