Bankruptcies in the US are recording upward trends as high borrowing costs, increased household expenses, and pressures in the labor market weigh heavily on the financial condition of both consumers and businesses. A total of 469,719 bankruptcy filings from individuals and businesses were submitted during the first nine months of 2026, a figure up 11% compared to the corresponding period of 2025, according to an announcement by the American Bankruptcy Institute (ABI) on October 8. Of the total filings, 444,252 involved individuals, while 25,467 involved businesses, with corporate bankruptcies showing a 7% increase. The data reflects growing difficulties in servicing debt obligations in an environment where funding costs remain elevated and economic uncertainty continues to weigh on the decisions of households and firms.
High interest rates and cost of living pressure households
"The continued increase in bankruptcy filings reflects the pressure from higher borrowing costs, rising household expenses, an uptick in consumer debt delinquencies, and a softening labor market," stated Michael Hunter, vice president of bankruptcy data provider Epiq AACER. Pressures are particularly evident in the cost of mortgage and consumer credit. The average weekly rate for 30-year fixed-rate mortgages stands at its highest level in roughly three years. At the same time, credit card rates have remained above 20% for more than three years. This burden constrains disposable household income and elevates the risk of default on obligations, especially for those carrying high debt loads or limited financial buffers. Joelle Scally, financial policy advisor at the Federal Reserve Bank of New York, pointed out in an August 11 announcement that new delinquencies on credit cards and auto loans "remain at elevated levels." Concurrently, the labor market displays signs of slowdown, as the US created fewer jobs in September than analysts had anticipated.
Explosive growth in small business bankruptcies
The trajectory of small business bankruptcies is raising particular concern. According to American Bankruptcy Institute data, 2,442 small business bankruptcy filings were recorded through the Subchapter V procedure during the first nine months of 2026, marking a 46% jump compared to the corresponding period of 2025. This specific procedure represents a specialized framework under US bankruptcy law that enables eligible small businesses to reorganize their debts under simplified terms relative to traditional Chapter 11 proceedings. Amy Quackenboss, executive director of the ABI, noted that the rise in bankruptcies, particularly among small businesses, underscores the ongoing struggles debtors face due to persistent inflationary pressures, elevated borrowing costs, and economic uncertainty. This development is especially critical for smaller firms, which typically possess limited liquidity reserves and are more vulnerable to increases in operating expenses and interest rates.
Inflation and US–Iran war perpetuate uncertainty
Inflationary pressures remain a major source of uncertainty for the American economy. According to Bureau of Labor Statistics data, annual inflation peaked at 4.2% in May 2026 and retreated to 3.4% in August. Despite the decrease, it remained higher than the 2.4% recorded in February. Economic uncertainty is compounded by geopolitical developments and the US–Iran war, which began in late February. In this environment, high financing costs and price pressures limit room for maneuver among businesses and households, raising the risk of new defaults. Amy Quackenboss stressed that congressional passage of the Bankruptcy Threshold Adjustment Act could expand access to bankruptcy protection procedures for struggling businesses and families. The bill provides for increasing the debt threshold for small businesses eligible under Chapter 11, Subchapter V, to $7.5 million from $3.4 million. Additionally, it provides for raising the debt limit for individuals filing under Chapter 13 to $2.75 million, up from roughly $2.1 million. The legislation has been approved by both the House of Representatives and the Senate.
Large corporate bankruptcies on the rise as well
The deteriorating picture is not confined to households and small firms; bankruptcies among large US corporations are also elevated. According to an October 8 announcement by consulting firm Cornerstone Research, 100 large enterprises submitted bankruptcy filings between July 2025 and June 2026. This figure represents a 22% increase over the historical average for the 2005–2025 period. Furthermore, within the last 12 months, 28 bankruptcy filings were recorded for companies reporting assets exceeding $1 billion. Matt Osborn, principal at Cornerstone Research and author of the report, pointed out that the persistently high rate of large corporate bankruptcies reflects ongoing broader economic headwinds for debt-reliant firms. As he noted, elevated interest rates, regulatory uncertainty, shifts in demand, and changing competitive dynamics in specific sectors—such as manufacturing—are among the most frequently cited factors pushing large enterprises into financial distress. This picture highlights that even large corporations with substantial assets are not immune to the fallout from expensive money and market shifts.
Positive signs for the economy also exist
Despite the rise in bankruptcies, certain recent economic indicators show that US business activity continues to demonstrate resilience. According to a September 23 report by S&P Global, business activity growth accelerated for the fourth consecutive month in September. In the manufacturing sector, new orders reached their highest level since April 2022. Chris Williamson, chief business economist at S&P Global Market Intelligence, stated that business activity expanded in September at its fastest pace in over five years. As he noted, excluding the sharp surge in demand that followed the reopening of the economy after COVID-19 pandemic lockdowns, the recent improvement was the largest recorded since early 2015. He estimated that business activity is registering robust growth across both manufacturing and services.
The critical gamble for the US economy
Data on bankruptcies and business activity paint a complex picture for the US economy. On one side, activity in manufacturing and services shows signs of acceleration. On the other, the surge in bankruptcies, rising payment delinquencies, and high borrowing costs demonstrate that a significant segment of households and businesses continues to face severe strain. The critical question is whether business growth will prove capable of offsetting the drag of high interest rates and elevated expenses, or whether bankruptcies will continue to mount as debtors struggle to service their obligations. The path of interest rates, the labor market, and debt delinquencies will serve as decisive factors shaping credit risk in the coming months.
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