After more than a decade of steady decline, personal bankruptcy filings in the United States have reversed course. The numbers are climbing, the economic headwinds are real, and for many American families, the question is no longer whether times are getting tighter — it’s what to do about it.

The Numbers Tell a Clear Story

According to data from the U.S. Courts and the American Bankruptcy Institute, total bankruptcy filings rose 11% in 2025, reaching 574,314 cases. Non-business (personal) filings accounted for the vast majority, climbing 11.2% to 549,577 cases.

Early 2026 data suggests the pace is quickening. February 2026 individual filings hit 43,225 — a 13% jump from the same month last year. Experts at PwC, Epiq AACER, and the American Bankruptcy Institute expect filings to remain elevated or rise further throughout the year.

While these numbers are still well below the 1.6 million filings recorded during the Great Recession in 2010, the trajectory is unmistakable. This is no longer a post-pandemic normalization — it is a sustained upward trend driven by structural economic pressure.

What’s Driving the Increase?

No single factor explains the rise. Rather, it’s a convergence of pressures that are squeezing household budgets from multiple directions simultaneously.

Persistently High Interest Rates

Credit card APRs remain above 20% for many borrowers. The Federal Reserve’s rate environment has made revolving debt significantly more expensive to carry, and borrowers who managed during the low-rate era are now struggling under the weight of compounding interest.

Record Consumer Debt

U.S. household debt reached $18.8 trillion by the end of 2025, with the overall delinquency rate climbing to 4.8% — the highest since 2017. Credit card balances alone surpassed $1 trillion, and auto loan delinquencies are near post-recession highs.

Medical Costs and Unexpected Expenses

Medical debt continues to be a significant contributing factor in personal bankruptcies, often compounding existing financial stress rather than acting as a standalone cause. A single hospitalization or chronic illness can push a family already living paycheck to paycheck past the breaking point.

Tariffs and Rising Costs of Living

Evolving tariff policies have raised the cost of consumer goods and disrupted supply chains, adding yet another layer of expense for families and small business owners alike. These cost increases hit hardest among those with the least financial cushion.

Shifting Demographics

Americans over 65 now represent nearly 19% of bankruptcy filers, up from just 4.5% in 2001. Fixed incomes, rising healthcare costs, and inadequate retirement savings are creating a growing crisis for older Americans.

What You Should Do If You See Financial Trouble Ahead

If you’re reading these headlines and feeling a knot in your stomach, that awareness is actually your greatest asset right now. The worst financial outcomes almost always come from waiting too long. Here are the concrete steps you should consider taking — starting today.

1. Get an Honest Picture of Where You Stand

Pull your credit reports from all three bureaus (you can do this for free at AnnualCreditReport.com). List every debt: the balance, interest rate, minimum payment, and whether you’re current. Calculate your total monthly obligations against your actual take-home income. This isn’t about judgment — it’s about clarity.

2. Contact Your Creditors Before They Contact You

This is the step most people skip, and it’s often the most impactful. Many creditors — including credit card companies, medical providers, and auto lenders — have hardship programs that can temporarily reduce interest rates, lower payments, or defer balances. The key is reaching out before you miss payments. Creditors are far more willing to negotiate with someone who is proactive than someone who is already in default.

3. Prioritize Your Debts Strategically

Not all debts are equal. Mortgage and car payments should generally take priority because the consequences of default — losing your home or your means of transportation — are immediate and severe. Unsecured debts like credit cards, while stressful, typically have more options for negotiation or eventual discharge. Understanding which debts carry the greatest risk helps you allocate limited resources wisely.

4. Explore Credit Counseling

Nonprofit credit counseling agencies approved by the Department of Justice can help you assess your situation, build a budget, and potentially enroll in a Debt Management Plan (DMP) that consolidates payments at reduced interest rates. This step is actually required before filing for bankruptcy, but it’s valuable even if you never file. Look for agencies affiliated with the National Foundation for Credit Counseling (NFCC).

5. Understand Your Bankruptcy Options — Before You Need Them

Knowledge is not commitment. Understanding the difference between Chapter 7 (liquidation) and Chapter 13 (reorganization) bankruptcy gives you the ability to make informed decisions rather than panicked ones. Chapter 7 can eliminate most unsecured debts but requires passing a means test. Chapter 13 allows you to keep your assets while repaying debts over a 3- to 5-year plan. Both carry significant consequences for your credit, but for many people, they offer a genuine path to a fresh start.

6. Consult a Bankruptcy Attorney Early

Many bankruptcy attorneys offer free or low-cost initial consultations. An experienced attorney can help you understand whether bankruptcy is the right option, which chapter applies to your situation, what assets are protected under your state’s exemption laws, and what alternatives might be available. Early consultation gives you time to plan rather than react.

7. Protect What You Can — Legally

Each state has its own set of bankruptcy exemptions that protect certain assets from creditors — including homestead exemptions, retirement accounts, and personal property up to specified limits. Understanding these exemptions before a crisis hits means you can make smart, legal decisions about where to direct your remaining resources. An attorney can help you navigate this.

8. Avoid the Traps

When people are desperate, predatory actors take notice. Be wary of debt settlement companies that charge large upfront fees and promise to eliminate your debts for pennies on the dollar. Avoid taking on new high-interest debt to pay off existing debt. Don’t drain your retirement accounts (which are typically protected in bankruptcy) to pay unsecured creditors. And be cautious of anyone who pressures you to act immediately without giving you time to consider your options.

The Bigger Picture

Bankruptcy is not a moral failing. It is a legal tool that exists precisely for moments like this — when economic forces beyond any individual’s control create impossible financial situations. The U.S. bankruptcy system was designed to give honest debtors a genuine fresh start, and hundreds of thousands of Americans use it every year to rebuild their financial lives.

The current environment — with elevated interest rates, record household debt, and rising costs across the board — is creating real hardship for real families. If you’re feeling the pressure, you’re not alone. And if you act early, informed, and with proper guidance, you have far more options than you might think.

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Disclaimer: This article is intended for general informational purposes only and does not constitute legal advice. Every financial situation is unique. Consult with a qualified bankruptcy attorney in your jurisdiction before making any decisions about debt management or bankruptcy filing. Statistics cited in this article are sourced from the U.S. Courts, the American Bankruptcy Institute, the Federal Reserve Bank of New York, and TransUnion.