Personal bankruptcy filings jump sharply in 2026, highlighting widening financial strain

U.S. personal bankruptcy filings have accelerated, exceeding 500,000 in 2025 and rising 12% in June 2026 compared with the previous year, as more consumers struggle with bills. After a prolonged drop that hit a low of roughly 368,000 in 2022, the numbers are rebounding amid stagnant wages, inflation, and higher credit-card rates. The 2005 Bankruptcy Abuse Prevention and Consumer Protection Act, which introduced income limits and mandatory counseling, had previously driven the decline.

Today, about two-thirds of filers choose Chapter 7 liquidation, which wipes out most debts, while the rest use Chapter 13 plans that spread repayments over three to five years. State-level equity exemptions differ sharply, with Texas allowing unlimited home equity and Arkansas capping it at $800. Research by a business-school professor and law professor Lois Lupica shows that bankruptcy does not create permanent credit stigma, but full financial recovery can take 15 to 25 years, longer than the ten-year credit-reporting period.