Bankruptcy Filings Soar in 2025 as Inflation Squeezes Households

According to the latest data, personal bankruptcy filings have seen a sharp rise in 2025, with a 15% increase in the first 9 months of the year compared to the same period in 2024. This surge highlights the mounting financial pressure on households across the country, as inflation continues to outpace wage growth for a significant portion of Americans.

The data shows that individual chapter 7 bankruptcy filings, which allow for the discharge of unsecured debt like credit cards and medical bills, have surged 19% year-over-year. Additionally, the growth in active chapter 13 cases, where debtors restructure their finances to repay a portion of their obligations, suggests that more consumers are turning to bankruptcy as a last resort.

Experts attribute this trend to the persistent impact of high inflation, which a recent report found has outpaced wage growth for 43% of the population. While wage gains have been more concentrated in high-paying jobs, lower and middle-income workers have seen more modest pay increases that have failed to keep up with the rising costs of essentials like food, rent, and energy.

As a result, bankruptcy is increasingly being viewed as a "necessary financial reset" for vulnerable households struggling under the weight of crushing debt. Legal scholars predict this upward trend in filings will likely continue, with the potential to accelerate further in 2026 if inflation-related pressures persist.