The Numbers Tell the Story
Bankruptcy in America is on an unmistakable upward trajectory. There were 574,314 bankruptcy cases filed in 2025, including both individual and business cases an 11% increase from the 517,308 filed in 2024, and a 26.8% increase from the 452,990 filed in 2023. The trend has continued into 2026: for the 12-month period ending March 31, 2026, bankruptcy filings rose to 591,850, an 11.9% increase from 529,080 during the year ending March 31, 2025, with business filings increasing to 25,960 and non business filings climbing to 565,890.
These numbers, while alarming in their pace, remain below historical peaks. For more than a decade, total filings fell steadily, from a high of nearly 1.6 million in September 2010 to a low of 380,634 in June 2022. Total filings have increased each quarter since then, but they remain far lower than historical highs.
The pandemic explains much of the interim suppression. The lingering impact of the pandemic and how relief aid helped suppress filings, followed by a steady rebound as relief programs expired and household debt pressures increased, is clearly reflected in the data. In 2019, the year before COVID, there were 774,940 filings. By 2020, filings had dropped 30%.
Who Is Filing and Why
The surge is predominantly individual, not corporate. Total individual filings registered an 11% increase in the first half of 2025, with 260,938 filings up from 235,849 in the same period a year prior. Individual Chapter 7 filings climbed to 163,219 during the first half of 2025, a 15% increase over the 141,566 Chapter 7 filings in the first half of 2024.
The drivers are well-documented. "Elevated interest rates, record-high credit card and household debt, and the resumption of student loan repayments and collections are all contributing factors driving more individuals to seek bankruptcy protection," according to Michael Hunter, vice president of Epiq AACER. As of April 2025, the student loan delinquency rate had more than tripled compared to pre-pandemic levels, with nearly 9 million loans currently delinquent.
Demographically, women are slightly more likely to submit personal bankruptcy filings than men, in part due to factors such as medical expenses, student loans, and narrower paths to financial freedom after divorces. Median gross household income for bankruptcy filers in 2019 was $35,000–$70,000, and about 25% of those who file carry student loan debt.
The Corporate Dimension: Mega-Bankruptcies and Sector Stress
On the business side, large corporate insolvencies have become a defining feature of the post-pandemic economy. A 4% increase in Chapter 7 and Chapter 11 filings among public and private companies with assets exceeding $100 million was recorded, with 117 large companies filing for bankruptcy over the 12 months spanning the second half of 2024 through the first half of 2025 up from 113 in the previous comparable period and 44% above the 2005–2024 annual average of 81 bankruptcies.
There were 32 mega bankruptcies (those filed by companies with over $1 billion in reported assets) over the same period, up from 24 in the prior year. Full-year corporate bankruptcies rose for the third consecutive year in 2025 to 785 filings the highest since 828 were recorded in 2010.
Household names have not been spared. Major brands that filed in 2025 include Rite Aid (for the second time in under two years), Hooters, 23 and Me, and Forever 21. Into 2026, the parade continued: Saks Global the parent company of Saks Fifth Avenue, Saks Off 5th, and Neiman Marcus filed for bankruptcy in mid-January after missing payments and letting debt stack up.
Persistent high interest rates increased debt servicing costs at the same time evolving tariff policies raised expenses and disrupted supply chains, especially for industrial firms reliant on imported components. Retailers and consumer brands were vulnerable as weaker demand and rising operating costs eroded margins, while healthcare and senior living providers faced costly capital expenditures, rising labour costs, and government funding cuts.
Bankruptcy and Liens: The Critical Intersection
Among the most legally consequential and widely misunderstood dimensions of bankruptcy is its relationship with liens. A lien is a legal claim or security interest attached to a debtor's property, and how liens behave in bankruptcy determines whether a debtor can truly achieve a financial fresh start.
The Foundational Rule: Liens Survive
The general rule in bankruptcy law is that "liens transfer through bankruptcy uninfluenced by the discharge." Bankruptcy discharges only eliminate the individual liability of the debtor. When the debtor's property is additionally liable for a debt, that lien remains attached to the property.
This creates a crucial asymmetry. Chapter 7 bankruptcy eliminates personal liability for most debts but does not remove valid liens from property by default. After bankruptcy, the creditor cannot pursue the debtor for a discharged debt, but the lien remains on the property meaning the creditor may still enforce it by foreclosing, repossessing, or demanding payment if the debtor wants to sell or refinance.
Three Categories of Liens There are three primary categories of liens that can arise in bankruptcy cases: judicial liens, statutory liens, and consensual liens.
Consensual (voluntary) liens are those the debtor agrees to when financing a purchase mortgages and auto loans are the classic examples. These are the most straightforward: the lender holds a security interest in the underlying asset, and that interest persists through bankruptcy unless the debtor reaffirms or surrenders the property.
Judicial liens (also called judgment liens) arise when a creditor obtains a court judgment and files a lien against the debtor's property. A judgment lien is a type of security interest that a judgment creditor can obtain against a debtor's property. If a creditor has a lien on property, the debtor must pay the creditor before selling or refinancing, and the creditor may even use the lien to force a sale of the home.
Statutory liens the most notable being tax liens are imposed by law without the debtor's consent and are treated with particular severity. A properly-noticed tax lien survives bankruptcy and continues to attach to any property owned at the time of the bankruptcy, though the lien does not attach to property acquired after the petition date.
Lien Avoidance: The Debtor's Most Powerful Tool
Lien avoidance can be a crucial aspect of a debtor's bankruptcy plan, as it can help preserve valuable assets and reduce debt obligations. Under Section 522(f) of the Bankruptcy Code, debtors can avoid judicial liens that impair their exemptions.
This tool has real-world significance for homeowners. Judicial liens against real property can be avoided in bankruptcy when the judgment lien impairs an exemption in real property, to the extent that it impairs the exemption. In practical terms, this means a debtor with a homestead exemption may be able to strip a judgment lien from their primary residence through a court motion but doing so requires filing a motion in bankruptcy court and presenting evidence of the property's value, such as an appraisal.
Critically, this avenue does not extend to all liens. Bankruptcy lawyers frequently seek to avoid judicial liens that impair exemptions, but the Section 522(f) tool refers only to judicial liens arising from lawsuits. The tax lien, as a statutory lien, cannot be avoided under this provision.
Chapter 13 and the "Cramdown" Strategy
For debtors with secured debt exceeding property value, Chapter 13 offers tools unavailable in a Chapter 7 liquidation. A "cramdown" allows a debtor to reduce a secured claim to the actual value of the collateral, with the remaining balance reclassified as unsecured debt often dischargeable. A related mechanism, "lien stripping," allows wholly underwater junior liens (such as a second mortgage with no equity supporting it) to be treated as unsecured and eliminated through the Chapter 13 plan.
Bankruptcy regulations also enable the debtor to reclaim assets that a creditor has taken ownership of prior to the bankruptcy being filed. If the debtor could have claimed that asset as exempt, and the garnishment occurred within ninety days of filing the bankruptcy, the debtor can litigate in the bankruptcy court to reclaim the property under 11 U.S.C. § 522(h).
The Broader Outlook
As we move through 2026, these patterns remain important indicators for policymakers, lenders, and businesses seeking to manage financial risk in an uncertain landscape. The uncertainty, combined with the increasingly litigious posture of many restructurings, presents complexities requiring greater expertise.
"Elevated prices, increased borrowing costs, and uncertain geopolitical events continue to add to the growing debt loads shouldered by financially distressed families and small businesses," according to ABI Executive Director Amy Quackenboss.
The interplay between bankruptcy and liens sits at the heart of that distress. For individual debtors, understanding which liens can be avoided and through which chapter is often the difference between a genuine fresh start and a discharge that leaves the debtor's property encumbered for years. For creditors, properly perfecting and filing liens before a debtor enters bankruptcy is the difference between secured recovery and writing off a loss. In either direction, the lien is not merely a legal technicality. It is the terrain on which financial futures are decided.
