June 2025 Bankruptcy Filings Up 14.73% Compared to Last June, Highest Growth Rate This Year

For the 35th consecutive month, total bankruptcy filings increased in June compared to the same month in the previous year. The 46,298 new petitions filed in June represented a 14.73 percent increase. That is the highest monthly increase so far in 2025. The number of business reorganizations went down significantly, but the pace of increase in business and consumer liquidations was the largest in nine months. Although the rate of growth in bankruptcy filings started to moderate this Spring, June brought the return of the double-digit increase.

A Closer Look by Chapter

In keeping with recent patterns, the filing increases were uneven across the major chapters of the Bankruptcy Code.

Chapter 7: Chapter 7 liquidation filings went up by 19.84 percent over last June. That was the most significant percentage increase in chapter 7s so far this year. These cases, which generally comprise the most distressed debtors who lack substantial assets, continued to dominate the bankruptcy landscape.

Chapter 13: The number of individuals with sufficient income to hold onto their non-exempt assets (e.g., homes, cars) by repaying some of their debts through a chapter 13 plan went up by 8.62 percent compared to last June. That was the second-highest rate of increase in chapter 13 filings this year.

Chapter 11: These are generally commercial cases in which the debtor seeks to stay in business by reorganizing the company’s debts. Chapter 11 cases plummeted by 18.53 percent in June. That can be explained in part by a spike in chapter 11 filings last June. Another factor contributing to the percentage drop was a surge in subchapter V filings last June, which are part of chapter 11.

Subchapter V: The number of small businesses filings under subchapter V decreased by a whopping 23.10 percent. The magnitude of the drop can be explained in large part by the torrid pace of subchapter V filings made last June to beat a change in law that substantially tightened the standards for eligibility.

News that May Affect Lending and Bankruptcy Filings

• Consumer Confidence: Last month’s blog included a plethora of recently released economic reports. Not a whole lot has changed in the data, except for results gleaned from the University of Michigan’s consumer confidence survey. Consumer sentiment in May registered the second lowest on record. But in June, the index rebounded. According to the June report, “[c]onsumer sentiment improved for the first time in six months, climbing 16% from last month but remaining about 20% below December 2024, when sentiment had exhibited a post-election bump.” https://www.sca.isr.umich.edu
• Interest Rates: The Federal Reserve’s Federal Open Market Committee announced it was holding the federal funds rate steady at between 4.25 and 4.5 percent. Insofar as bankruptcy filing rates, especially for businesses, have been sensitive to interest rate changes, this is important news for lenders.
  
  In an hour-long news conference after the Fed announcement, Fed Chairman Jerome Powell repeatedly insisted that the overall economic conditions are “solid,” but said that there are also many uncertainties. In response to questions, Chairman Powell stated that the impact of new tariffs will depend on still-unknown factors, such as the size and duration of the tariffs. He also pointed to changes in immigration and the international situation as requiring the Fed to view future data before making rate adjustments. He could not rule out the Fed’s dual mandate of high employment and low inflation coming into “tension,” but for now, he sees the economy as well balanced and achieving both goals. Chairman Powell reiterated his views in Congressional testimony a week later.
  
  Following the Fed’s action to hold interest rates steady, most commentators suggested that the Fed is unlikely to lower interest rates at its next meeting. However, two Fed Governors, who are rumored candidates to succeed Chairman Powell, said they would consider reducing the rate at the next meeting, scheduled for the end of July. The intrigue never stops.
• Chapter 11 Debtors Blame Tariffs: Although no one knows for sure what the short and long-term positive or negative impacts of new tariffs on imported goods may be, two debtors in significant chapter 11 cases placed the primary blame for their financial distress on tariffs. In June, home goods retailer At Home and automotive parts supplier Marelli both attributed increased tariffs as a contributing factor to their bankruptcy filings. [“Retailer At Home Files Chapter 11 Bankruptcy, Hobbled by Tariffs and Debt,” WSJPro, 6/16/25.] Some in the financial news media have ascribed other insolvencies to tariffs as well. It will be worth watching the “first day” court filings by other businesses to see whether more debtors will ascribe their financial woes to government policy.
• Finding Economic Tranquility: Despite concerns about the economic future, the Financial Times reminds us that “the degree of stability in the global economy is probably unprecedented.” In an interesting analysis by FT editor Robin Wigglesworth, major economic disruptions over the past 20 years were charted. The author’s conclusion: “with even major events – such as the financial crisis of 2008 and COVID-19 and its inflationary aftermath – only causing modest, shortlived upticks in economic turbulence,” the world has avoided major upheavals. Mr. Wigglesworth does add a note of caution: financial markets are more prone to sudden shocks and “each recovery starts with a larger debt overhand than the last, sowing the seeds for the next crisis.” [“The era of sudden shocks – revisited,” Financial Times (FT Alphaville), 6/17/25.]

Conclusion

The tide of bankruptcy filings continues to rise. The 14.73 percent increase in filings was quite substantial. Recent economic reports and analyses suggest there may be unexpected crosscurrents below the surface and sightings of rocks that no economic maps have charted before. All this suggests that upward trend bankruptcy filings persist, and we cannot rule out big surprises later this year.