Are Bankruptcy Rates Going Up in 2026?

 May 11, 2026 in Uncategorized

Bankruptcy rates appear likely to remain a serious concern in 2026, especially for consumers and small businesses that have spent the last several years trying to absorb higher prices, higher interest rates, rising credit card balances, medical expenses, and uneven income growth.

Over the last few years, bankruptcy filings have steadily climbed for both businesses and consumers. That does not necessarily mean people are becoming irresponsible with money. A job loss, divorce, business downturn, medical problem, failed repayment plan, or accumulation of high-interest debt can push a person or business from "barely managing" to "unable to recover without legal protection." 

How Many People Are Filing for Bankruptcy Yearly in the United States?

The United States Courts bankruptcy statistics include quarterly filing tables and data visualizations covering bankruptcy cases by chapter, nature of debt, and reporting period. Data from the United States Courts shows a clear upward trend in Chapter 13 bankruptcy filings since 2021:

• 2021: 119,502 filings
• 2022: 125,655 filings
• 2023: 166,449 filings
• 2024: 187,539 filings
• 2025: 199,130 filings

Taken together, these numbers show a sustained increase. Chapter 13 filings rose substantially from 2021 to 2025, and that trend may continue into 2026 if households keep facing high debt loads and limited financial flexibility.

Is Filing for Bankruptcy Necessarily a Bad Thing?

Filing for bankruptcy can feel like failure, but that is not always an accurate representation of a person’s real circumstances. Bankruptcy is a legal process intended for people and businesses that cannot reasonably manage debt under current conditions. Sometimes debt becomes impossible to repay without destroying the debtor’s ability to work, live, and rebuild their finances.

Bankruptcy can have consequences, but it can also stop deeper financial damage. It may halt foreclosure, stop wage garnishment, prevent creditor harassment, and give a person time to reorganize during a period of economic strain.

What Is Chapter 13 Bankruptcy?

Chapter 13 bankruptcy is often called a wage earner’s bankruptcy because it is designed for people who have regular income but need help reorganizing debt. Instead of wiping out qualifying debts through liquidation, as Chapter 7 often does, Chapter 13 creates a repayment plan that usually lasts three to five years.

Under Chapter 13, the debtor proposes a plan to repay some or all debts over time. The exact amount depends on income, expenses, assets, debt type, and bankruptcy rules. Certain debts, such as recent taxes, child support, and secured debts tied to homes or vehicles, may receive different treatment than credit cards or medical bills.

One of the main reasons people choose Chapter 13 is that it may help them keep important property. For example, someone who has fallen behind on mortgage payments may be able to catch up through the repayment plan while staying in the home. A person behind on car payments may also have options to keep the vehicle, depending on the circumstances.

Are There Any Long-Term Drawbacks to Filing for Chapter 13 Bankruptcy?

Chapter 13 bankruptcy can create meaningful relief, but it also carries long-term drawbacks that should not be overlooked. A bankruptcy filing can appear on a credit report for several years, and it may affect a person’s ability to qualify for certain loans, credit cards, leases, or favorable interest rates. Even after discharge, rebuilding credit takes time and discipline.

Chapter 13 also requires commitment. A repayment plan lasting three to five years can be difficult to maintain, especially if income changes, expenses rise, or unexpected emergencies occur. Missing plan payments can put the case at risk. Some people enter Chapter 13 with good intentions but struggle to complete the plan if their financial situation remains unstable.

Still, these drawbacks must be weighed against the alternatives. Lawsuits, repossessions, foreclosure, garnishment, bank levies, and mounting interest can also cause long-term damage. In some cases, Chapter 13 may be the more controlled and less destructive option.

When Should You Consider Filing for Chapter 13 Bankruptcy?

A person should consider Chapter 13 bankruptcy when debt has become unmanageable but they still have a source of regular income. This may be a practical option for people who are facing foreclosure, trying to stop a vehicle repossession, dealing with tax debt, or unable to keep up with credit cards, medical bills, or personal loans.

Chapter 13 may also make sense when a person does not qualify for Chapter 7, owns property they want to protect, or needs time to catch up on secured debts. It can be especially useful for people who are not trying to avoid responsibility, but who need a realistic repayment structure that creditors cannot constantly disrupt.

Warning signs may include using credit cards for basic necessities, receiving lawsuit notices, falling behind on secured debt, draining retirement savings to pay bills, or making minimum payments without ever reducing balances. At that point, waiting can make the problem worse.

Bankruptcy should not be approached casually, but it should not be dismissed out of shame, either. For many people, Chapter 13 is about pursuing a structured path forward when debt has become too heavy to carry alone.