Personal bankruptcy filings are soaring in 2026, signaling growing economic distress
More than 500,000 Americans filed for personal bankruptcy in 2025, nearly 50% more than in 2022, with filings up another 12% in June 2026 compared with a year earlier. The rise follows a decade-long decline that hit a low of about 368,000 filings in 2022, driven earlier by the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act and pandemic-era stimulus.
State law determines outcomes dramatically: Texas places no limit on home equity debtors can protect, while Arkansas caps it at $800 and Kentucky at $5,000. In 2024, people filing for bankruptcy held about $75 billion in assets against $86 billion owed to creditors, an $11 billion gap that bankruptcy law is structurally unable to close for everyone at once.
Most filers use Chapter 7 liquidation, which wipes out most debts in exchange for surrendering assets beyond state exemptions; higher earners are generally required to use the slower Chapter 13 repayment process instead. Nineteen categories of debt, including most student loans and taxes, survive bankruptcy regardless of which chapter is filed.
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