Chapter 7 Individual Bankruptcy Filings Jump 15 Percent in First 9 Months of 2025

There are also growing concerns about rising credit stress among Americans.

Published: 10/4/2025, 9:45:01 AM EDT

Chapter 7 Individual Bankruptcy Filings Jump 15 Percent in First 9 Months of 2025 — A person arrives at the U.S. District Bankruptcy Court for the Southern District of New York, on Jan. 9, 2020. (Brendan McDermid/Reuters)

A total of 249,152 individual Chapter 7 bankruptcy filings were made in the first nine months of this year in the United States, which is a 15 percent jump compared to the same period last year, the American Bankruptcy Institute (ABI) said in an Oct. 3 statement.

Chapter 7 bankruptcy, also known as liquidation bankruptcy, involves a court-appointed trustee selling off an individual’s nonexempt assets to pay off creditors. It can discharge certain debts, with the individual no longer obliged to pay them.

This is different from a Chapter 13 bankruptcy, where an individual retains all assets, but has to agree on a repayment plan with creditors that can last for three to five years.

There were 149,337 individual Chapter 13 bankruptcy filings made during the first nine months of 2025, up 4 percent from the same period in 2024, ABI said.

Total individual bankruptcy filings rose 11 percent during this period, it added.

The sharp rise highlights mounting financial pressure on households, Michael Hunter, vice president of bankruptcy data provider Epiq AACER, said in the ABI statement.

“The growth in active Chapter 13 case inventory suggests more consumers are turning to bankruptcy as a necessary financial reset. We expect this upward trend to continue, with a strong likelihood of accelerating into 2026.”

There are also growing concerns about rising credit stress among Americans.

In a Sept. 24 statement, financial services company VantageScore stated that credit delinquencies rose across nearly all credit tiers and delinquency categories in August, year-over-year.

“For example, the increase in auto loan and personal loan credit delinquencies likely reflects, in part, the compounding effects of sustained inflation, consistently elevated interest rates, higher borrowing costs, and an unsteady employment picture,” said Susan Fahy, EVP and Chief Digital Officer at VantageScore.

However, the economic numbers have fared better in recent times. The inflation rate has remained between 2.3 and 3 percent since June last year, accompanied by a steady job market, which has contributed to stabilizing the economy.

The number of job openings in the United States rose by 19,000 in August to 7.27 million, according to the Bureau of Labor Statistics’s Sept. 30 Job Openings and Labor Turnover Survey report.

A Sept. 30 research report by job site Indeed characterized the labor market as a “low firing, low hiring, low churn” one.

“Limited layoffs have been a reassuring constant in the face of mounting volatility elsewhere in the economy, and the relative stability for those workers who already have a job has helped keep spending steady,” according to the report.

On the flip side, “for people seeking a job who are on the outside looking in, a lack of dynamism in the market is keeping their options limited.”

Overall Economic Optimism

Meanwhile, commercial bankruptcy filings also rose in the first nine months of 2025, ABI said in its statement.

Overall, commercial filings were up 4 percent year-over-year, with small business filings rising by 6 percent.

“With household debts climbing, lending terms tightening and geopolitical uncertainty creating challenges within supply chains, bankruptcies continue their ascent toward pre-pandemic levels,” said ABI Executive Director Amy Quackenboss.

“Families or businesses overwhelmed by growing debt loads have a financial lifeline through the bankruptcy process.”

Despite the growth in commercial bankruptcy filings, optimism among small businesses improved in August, the National Federation of Independent Business (NFIB) said in a Sept. 9 statement. NFIB’s Small Business Optimism Index rose 0.5 points in August to hit 100.8.

“Optimism increased slightly in August with more owners reporting stronger sales expectations and improved earnings,” NFIB Chief Economist Bill Dunkelberg said.

“While owners have cited an improvement in overall business health, labor quality remained the top issue on Main Street.”

The Trump administration has taken steps to assuage the challenges faced by businesses. On Sept. 30, the Small Business Administration (SBA) announced that President Donald Trump delivered “record capital” to small businesses in fiscal year 2025.

The agency guaranteed 84,400 small business loans for $44.8 billion during the 2025 fiscal year, with the majority of them approved after Trump assumed office in January, it said. These loans were under SBA’s 7(a) and 504 loan programs.

“With record loan volume, both borrowers and lenders are sending a clear signal that America First means America is growing again.”

The S&P 500 stock index has reflected the positive sentiment among investors in the economy and is currently hitting all-time highs. The index has risen nearly 39 percent from its April low as of Friday.

Businesses have also been more successful in securing contracts with foreign government buyers. In the first nine months under the Trump administration, American businesses have signed 98 such contracts valued at a “record” $170 billion, the Commerce Department’s International Trade Administration said in a Sept. 30 statement.

From The Epoch Times