The first half of 2025 showed a clear uptick in U.S. bankruptcy activity after several years of relative calm. Federal court data and industry trackers report that total filings have grown noticeably year-over-year: filings for the 12-month period ending June 30, 2025 were up roughly double-digits compared with the prior 12 months, with federal court statistics showing an 11.5% rise in personal and business bankruptcy filings in the year ending June 2025 (United States Courts, 2025).
Breaking that high-level rise down, the increase has been driven primarily by consumer petitions. Monthly and quarterly tallies compiled by major bankruptcy-data providers and the Administrative Office of the U.S. Courts show consumer (individual) filings and Chapter 7/13 filings trending up through the first half of 2025—a rebound from the unusually low consumer filing levels seen immediately after pandemic stimulus and eviction/mortgage forbearance unwind. One industry summary put total filings in June 2025 about 15% higher than June 2024 and noted individual filings up in the mid-teens year-over-year (EPIQ News, 2025).
At the same time, the mix of filings shows uneven patterns. Commercial Chapter 11 activity has not marched in lockstep with consumer filings; some commercial chapter categories actually declined in certain months, even while total filings rose. This reflects a bifurcated picture: an elevated number of smaller business and consumer distress filings alongside a smaller—but highly visible—set of larger corporate restructurings and liquidations.
Why the rise now? The proximate causes are familiar: elevated interest rates, inflation, and waning pandemic supports have combined to squeeze household budgets and corporate margins. For companies, high borrowing costs and soft consumer spending in discretionary sectors pushed several household names into distress during 2024, creating momentum that carried into early 2025. Market coverage characterized 2024 as a year of unusually high corporate bankruptcy activity—the highest corporate tally since the post-2008 period—and that fallout continued into 2025 in targeted industries (retail, casual dining, certain services).
Putting 2025 in historical context helps clarify the scale. The spike in filings after the 2007–2009 Great Recession produced a protracted peak in bankruptcies (peaking around 2010), driven by systemic credit breakdowns and mass household losses; by contrast the current rise in 2024–2025 is notable but modest relative to that earlier surge. Federal analyses emphasize that while the recent acceleration is meaningful and sustained over several quarters, aggregate filings remain well below the peaks seen in the Great Recession era (U.S. Department of Justice, 2011). The character of filings differs as well: the post-2008 wave included very large volumes of consumer Chapter 7 filings tied to mortgage and housing shocks, whereas the recent increases reflect a wider mix of consumer cash-flow distress, small business strain, and industry-specific corporate failures.
The Rise in Consumer Debt, Credit Card Delinquency, and Student Loan Strain
Alongside increasing bankruptcies in the first half of 2025, there has been a marked rise in consumer debt burdens—especially revolving credit (credit cards) and federal student loans. These trends amplify the financial stress on households and help to explain the uptick in filings.
Credit Card Debt and Delinquency
Revolving consumer credit has rebounded sharply. By mid-2025, revolving credit was growing at an annualized rate near 9.7%, with total outstanding credit card debt hitting about $1.21 trillion in Q2 2025 Delinquency rates have climbed rapidly: roughly 14.1% of credit card balances were at least 30 days overdue by Q1 2025. Lower-income households are disproportionately affected, with delinquency rates exceeding 22% in the lowest-income brackets compared to just 8% among the high. More severe delinquency (90+ days overdue) now affects about 10.7% of all credit card balances, with the lowest-income groups hit hardest (Board of Governors of the Federal Reserve System, 2025).
Student Loans: Delinquency, Defaults, and Policy Tailwinds
The end of pandemic-era payment pauses has triggered a dramatic return of student loan delinquency. Rates jumped from below 1% during the pause to nearly 8% once repayment resumed (Education Data Initiative, August, 2025). As of Q2 2025, about 11.3% of federal student loan dollars were delinquent, and 5.8 million borrowers were 90 or more days past due. Defaults—defined as nonpayment for over 360 days—still affect more than 5 million borrowers, and late-stage delinquency has climbed sharply. If deterioration continues, nearly one-quarter of the federal student loan portfolio could soon be in default.
How These Debt Trends Feed Into Bankruptcy
The rising burden of credit card and student loan obligations is putting pressure on household cash flows. Higher revolving debt with compounding interest, combined with the resumption of student loan repayments, increases monthly obligations to levels many borrowers cannot sustain. Any unexpected expense—medical bills, job loss, or auto repairs—becomes a tipping point toward insolvency. Compared to earlier cycles, this confluence of high interest rates and resuming obligations creates a sharper shock, intensifying bankruptcy risk even if overall economic growth remains steady.
Outlook for the Remainder of 2025
If interest rates decline, some pressure could ease and filings may stabilize. But a prolonged cost-of-living squeeze, continued student loan stress, and rising delinquency rates suggest the bankruptcy uptick is likely to persist through year-end. For practitioners, lenders, and policymakers, the key will be whether today’s rising debt strain resembles a “mini-cycle” of distress or the beginning of a longer, more systemic rise in insolvency.Seeking Legal Guidance
The attorneys in Perkins Thompson’s Creditors’ Rights and Bankruptcy practice group are here to guide creditors through commercial and consumer bankruptcy, insolvency, and recovery matters. For assistance with these issues, please contact Anthony Manhart.
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