Quick Answer: Total U.S. bankruptcy filings have jumped 50% since hitting a 24-year low of 380,634 in mid-2022, reaching 574,314 in the year ending December 2025 — an 11% year-over-year increase. Filings among 18- to 29-year-olds have surged even faster, up 17% from Q1 to Q2 of 2024 alone. But before anyone calls this a crisis, consider: more people filing for bankruptcy may mean more people are finally getting the help they need.
Update (April 2026): Mega corporate bankruptcies surged in early 2025 — and the consumer debt wave I describe below is now arriving on schedule, 6-9 months later.
Expert Context: I filed bankruptcy myself in 1990 after my real estate business collapsed. It was the best financial decision I ever made. I rebuilt everything — founded a nonprofit with 70 employees, wrote a book the Washington Post named Book of the Month, got invited to the UK Parliament. When I see bankruptcy numbers going up, I don’t see failure. I see people who stopped suffering in silence and used a legal tool that exists specifically for this situation.
The Numbers
According to data from the Administrative Office of the U.S. Courts, total bankruptcy filings rose 11% in the year ending December 31, 2025:
Every weekday I read the enforcement actions, filings and fine print the outlets skip, and turn them into the one or two moves that actually improve your position — a rate worth moving for, a fee you can refuse, a deadline to beat before it costs you.
In the latest issue (Sep 11): You drive to the dealership to pick up the car. There is no car. There was never a car.
I write Your Money Actually most weekdays — actionable money information you will not find anywhere else, and the small decisions that compound. It is free, I sell nothing, and I take no money from any company I write about.
- Chapter 7 filings: 356,724 (straight liquidation — most debts discharged in ~90 days)
- Chapter 13 filings: 207,889 (structured repayment plan over 3-5 years)
- Business filings: 24,737 (up 7.1%)
- Non-business filings: 549,577 (up 11.2% — these are individual consumers)
For context: filings peaked at nearly 1.6 million in September 2010 after the Great Recession. Even at 574,314, current filings are barely a third of that peak. The 2022 low was an anomaly driven by pandemic stimulus — not a sign that Americans had suddenly solved their debt problems.
Why Young Adults Are Filing More
The American Bankruptcy Institute reported that filings among 18- to 29-year-olds surged 17% from Q1 to Q2 of 2024 and were up 13% compared to the prior year. Total debt held by that age group has reached $1.12 trillion.
The drivers aren’t mysterious:
- Rising interest rates have pushed up minimum payments on credit card debt, making it harder to keep up
- Student loan payments resumed after the pandemic pause, adding hundreds of dollars monthly to budgets that were already stretched
- Inflation outpaced wage growth for younger workers, especially in rent and food
- Pandemic savings are gone — the stimulus cushion that kept filings artificially low in 2021-2022 has been spent
Why More Filings Might Actually Be Good News
This is where I’m going to say something that sounds counterintuitive: more bankruptcy filings can be a sign of progress, not collapse.
Myth: “Rising bankruptcy filings mean the economy is failing and people are irresponsible.”
Reality: Rising filings often mean more people are getting accurate information about their options instead of suffering through debt they can’t repay. The real crisis isn’t when people file — it’s when they DON’T file, because shame, misinformation, or predatory debt relief companies keep them trapped in cycles that make everything worse. Federal Reserve research shows that bankruptcy filers actually experience better financial outcomes than people who are insolvent but don’t file.
Here’s what the “bankruptcy is failure” narrative misses:
- Credit scores recover faster than people think. Most filers see improvement within 12-18 months. The Federal Reserve found filers experienced a “sharp boost” in credit scores.
- Chapter 7 takes about 90 days. Compare that to 4-5 years on a debt management plan or 2-4 years of debt settlement — both of which have far lower completion rates.
- Retirement savings are protected. Your 401(k) and IRA are exempt in bankruptcy. Every month you spend repaying unsecured debt instead of saving for retirement is a month of lost compound growth — potentially $400,000+ over a career.
- Nobody profits from bankruptcy. That’s exactly why no one markets it. Debt settlement companies charge 15-25% of your debt. Credit counseling agencies take a cut. Bankruptcy attorneys charge a flat fee. The incentives in the debt industry are backwards — the fastest, most effective solution is the one nobody sells.
What to Do If You’re a Young Adult Drowning in Debt
If you’re in your 20s or 30s and the math is broken — income doesn’t cover expenses plus debt payments — here’s what I’d tell you:
- Stop feeling ashamed. Debt is math, not morality. You are not your debt. Creditors are businesses that made calculated risks — some of those risks don’t pay off.
- Understand ALL your options. My Find Your Path tool walks you through every option based on your specific situation — including the ones nobody else will tell you about.
- Don’t pay for help you can get for free. Bankruptcy consultations are typically free. Federal student loan programs are free at StudentAid.gov. Credit reports are free at AnnualCreditReport.com.
- Protect your retirement. If you’re choosing between paying unsecured debt and contributing to a 401(k), the math almost always favors the retirement account — especially in your 20s and 30s when compound growth is most powerful.
The Bottom Line
Bankruptcy filings are up 50% since 2022, with young adults leading the increase. That’s not a sign of national failure — it’s a sign that more people are using a legal tool designed to give them a fresh start. The real crisis is the millions who are insolvent but not filing, trapped by shame and misinformation while their retirement savings erode. If the math is broken, bankruptcy takes 90 days. A debt management plan takes 5 years. Your 401(k) doesn’t wait.
Frequently Asked Questions
Why are bankruptcy filings increasing?
Filings are rising from a 24-year low in mid-2022, which was artificially suppressed by pandemic stimulus payments, enhanced unemployment benefits, and student loan payment pauses. As those supports expired and interest rates rose, more consumers found themselves unable to keep up with debt payments. The current level of 574,314 annual filings is still far below the post-Great Recession peak of nearly 1.6 million in 2010.
Is bankruptcy a good option for young adults?
For young adults whose debt math is broken — meaning income doesn’t reliably cover expenses plus debt payments — Chapter 7 bankruptcy can be particularly effective. It discharges most unsecured debt in about 90 days, credit scores typically begin recovering within 12-18 months, and retirement savings (401(k), IRA) are fully protected. The earlier you address unsustainable debt, the more years of retirement savings you preserve.
Will bankruptcy ruin my credit forever?
No. While a Chapter 7 bankruptcy appears on your credit report for up to 10 years, the impact diminishes significantly over time. Federal Reserve research found that bankruptcy filers experienced a “sharp boost” in credit scores and had less financial stress than people who were insolvent but didn’t file. Most filers qualify for a car loan within 1 year and a mortgage within 2-3 years.
How much does it cost to file for bankruptcy?
Chapter 7 attorney fees typically range from $1,000 to $2,500 depending on location and complexity. Court filing fees are approximately $338. For people who cannot afford the filing fee, a fee waiver is available. Many bankruptcy attorneys offer free initial consultations and payment plans.
What debts does Chapter 7 bankruptcy eliminate?
Chapter 7 discharges most unsecured debts, including credit card balances, medical bills, personal loans, and some older tax debts. It does not discharge student loans (with limited exceptions), child support, alimony, most tax debts less than 3 years old, or debts incurred through fraud. Your retirement accounts (401(k), IRA) are protected in bankruptcy.
