March Bankruptcy Filings Hit Five-Year High, Resembling 2024 Growth Trend

Total bankruptcy filings rose by 12.91 percent in March over the same month last year. With 50,208 new cases, the March filing number was the largest in five years. This followed a surprisingly low increase of 3.27 percent in February. With the return of a double-digit climb last month, the filing trends we have seen for the last couple of years are back on track.

A Closer Look by Chapter

Not only did the double-digit increase reflect a return to long-standing trends, but the distribution of filing increases among the main chapters of the Bankruptcy Coe also fit into accustomed patterns.

Chapter 7 liquidation filings increased by 15.77 percent. These liquidation cases involving mainly consumers continued to drive the overall filing number upwards. These consumers did well during the pandemic because of government cash assistance; many took on new credit obligations. Now that their cash lifeline is gone, many face extreme financial distress.

Chapter 13 repayment plan filings also increased, albeit at a relatively modest 7.36 percent. That is still far above the less than one percent rise last month.

Chapter 11 case filings, often business reorganizations, rose briskly by 27.33 percent. That is a far cry from the drop of more than 35 percent in February 2025 compared to the previous February. Some of the March increase may simply reflect a backlog of cases that were not filed before the end of the shortest month of the year. However, the filing number also reflects the heightened need for bankruptcy as a way for businesses to cut their debt or sell their assets.

Subchapter V small business filings were down again in February by 3.02 percent. That was less than the nearly 15 percent decrease last month but confirms again that subchapter V is only a shadow of its former self after the debt eligibility limits were dramatically lowered last year. Subchapter Vs can now be used only by small businesses with less than $3 million in debts.

Recap of Some Regulatory News From the Nation’s Capital

There have been no confirmations of nominees for major regulatory appointments over the past two weeks. Although some nominations may be only a few days away from confirmation, it will take a little longer for several key positions to be filled. At the Federal Trade Commission, Democratic Commissioners Rebecca Slaughter and Alvaro Bedoya have filed a lawsuit challenging their firing by President Trump. Similarly, at the Justice Department, U.S. Trustee Director Tara Twomey has appealed her firing with the Merit Systems Protection Board. Along with other pending lawsuits, the Slaughter-Bedoya actions will test the President’s constitutional authority to fire Commissioners “without cause” at previously considered “independent” regulatory agencies. The summary termination of Twomey and other senior officials may raise the constitutionality of civil service due process protections.

Economic Trends Are Curiouser and Curiouser

Finding definitive links between economic data and overall bankruptcy filings is hard. One of the clearer links is to interest rates, which will remain higher for a while longer. That means current bankruptcy filing levels will remain elevated, especially for chapter 11 businesses.

Here are some economic data that policy-makers and commentators have been talking about recently:

• When recently pronouncing the country’s general economic condition as “solid,” Fed Chair Powell cited the inflation rate at 2.5 percent in January, unemployment at 4.1 in February, and 2.3 percent growth in the Gross Domestic Product in the 4^th quarter.
• A recent issue of the Economist magazine suggested additional market trends worth watching: the recent stock market plunge should be viewed historically when, at least over the past 40 years, drops were dwarfed by big gains over time; however, “Market Tectonics” are changing “under the investors’ feet” in ways not yet measured (“Buttonwood,” 3/22/25). Also, the stock market impact on the overall economy is fast rising, as households and non-profits now hold $38 trillion in shares, which reflects a more than a doubling over the past six years (“Finance and Economics,” 3/22/25). We will start plotting changes in the stock market with bankruptcy filings.

Consumer Cases of Interest

There are two cases of potential significance to consumer lenders that AIS continues to watch:

• In re Klemkowski (Klemkowsi v. CitiMortgage, Inc.), case no. 22-10257-MMH (Bankr. D. Md. Oct. 30, 2024): The bankruptcy court in the district of Maryland found that a bank’s termination of access to an automatic mortgage payment system for the sole reason that the homeowner had filed a chapter 13 bankruptcy petition constituted a violation of the automatic stay. The court has long continued a hearing to determine remedies. An interlocutory appeal to the district was denied. The potential impact of the decision and remedies are significant, but for now, the decision lacks finality, and no remedies have been imposed.

• In re Cordova (Cordova v. City of Chicago), c. 13 no. 19bk06255, adv. no. 19ap00684 (Bankr. N.D. Ill. 2025): In a complex opinion pertaining to technicalities of class action procedures, the bankruptcy court granted class certification to debtor-plaintiffs who allegedly suffered from both a violation of the turn-over and automatic stay provisions of the Bankruptcy Code. The court has not adjudicated the merits, but the decision highlights the potentially enormous risk to creditors for committing the same violation against a large number of debtors. The road ahead may have twists and turns, not to mention a pending motion to appeal, but the case’s progress is worth monitoring. (See “Rochelle Daily Wire” found at www.abi.org, Mar. 18, 2025.)

Conclusion

March 2025 filings returned to the trend of double-digit increases. With uncertain interest rates and other economic news, it is unsurprising that both consumers and businesses continue to need bankruptcy relief in high numbers. If inflation and unemployment rates go up, consumers already behind on their payments may feel the pinch especially. With so many policy changes going in Washington, D.C., it is hard to see clearly into the crystal ball of bankruptcy. For now, if you want to see where bankruptcy filings are headed, you should probably look up.