Small Business Bankruptcies Statistics: Subchapter V Surge

Small business bankruptcy filings are running well above pre-pandemic levels and still climbing. Filings under Subchapter V, the streamlined reorganization track built specifically for smaller companies, jumped 67% in the first quarter of 2026 compared with the same period a year earlier, and February 2026 alone saw a 91% year-over-year increase.¹² The latest small business bankruptcy statistics point to a wave driven by exhausted pandemic relief, sticky inflation, elevated borrowing costs, and newer disruption from trade policy.

Total business filings for calendar year 2025 reached 24,737, up 7.1% over 2024, and by the third quarter of 2025 quarterly business filings hit 24,039, the highest single-quarter figure since 2016.³⁴ Chapter 11 filings, the main reorganization vehicle, totaled 9,201 in 2025, up from 8,884 in 2024, 7,456 in 2023, and 4,918 in 2022. PwC called 2025 a 10-year high for Chapter 11 activity and the fourth consecutive annual increase.⁵ Coface found Q3 2025 business insolvencies running 15% above the 2019 average, the first time in two consecutive quarters filings had cleared pre-pandemic levels.⁶

The Subchapter V Surge

Subchapter V was created by the Small Business Reorganization Act of 2019 as a faster, cheaper alternative to a traditional Chapter 11 case. It eliminates creditors’ committees, imposes shorter plan-filing deadlines, and waives U.S. Trustee quarterly fees.⁷

Elections under that track have climbed sharply. Full-year 2025 saw 2,446 Subchapter V filings, up 11% from 2,202 in 2024.⁸ Then the pace accelerated: 833 in the first quarter of 2026, versus 499 in Q1 2025.¹ Broader commercial Chapter 11 filings moved with them: 2,422 in Q1 2026, a 37% jump from 1,764 a year earlier, with total commercial bankruptcies across all chapters reaching 8,436, up 14%.⁹

April 2026 data showed the trend continuing without dramatic acceleration. Commercial Chapter 11 filings hit 644, up 42% year over year but down 2% from March’s 658. Subchapter V elections rose 12% month over month to 301.¹⁰

Who Is Filing

The businesses driving the surge are mostly not household names. Experian’s analysis found most current business bankruptcies involve firms with fewer than five employees, under 10 years old, and earning less than $1 million in annual revenue.⁴ That profile lines up with a post-pandemic formation boom: an average of 446,000 new businesses have launched each month since July 2020, and 497,000 launched in December 2025, 53% above pre-pandemic averages. Many of those young firms are now operating in an economy considerably harsher than the one they were born into.

Distressed firms tend to leave a paper trail before filing. At-risk businesses are three to four times more likely to apply for credit in the run-up to a filing, carry noticeably higher commercial credit balances than non-filing peers, and show elevated delinquencies and higher credit utilization months in advance.⁴

Why Filings Are Rising

No single factor accounts for the wave. Several pressures are compounding.

Inflation and input costs. The Federal Reserve’s Small Business Credit Survey, fielded in late 2024, found 75% of small employer firms named the rising cost of goods, services, or wages as their top financial challenge.¹¹ NFIB’s May 2026 survey put inflation as the single most important problem for 18% of owners and labor costs at 14%, the highest labor-cost reading in that survey’s history, with a net 36% of owners raising selling prices, the largest share since March 2023.¹²

Borrowing costs. The average interest rate on short-maturity small business loans stood at 7.8% in May 2026.¹² PwC noted borrowing costs remain elevated despite 2025 rate cuts, hitting hardest at businesses whose capital structures were built during the near-zero-rate period of 2020 and 2021.⁵ Among firms denied financing, 41% were told in 2024 that their existing debt was the reason, nearly double the 22% rate in 2021.¹¹

End of pandemic relief. Coface described the low-filing period after the pandemic as an “insolvency gap” held open by government support programs. As those supports expired, the gap closed and then reversed.⁶ ABI Executive Director Amy Quackenboss attributed the Q1 2026 small business surge to “persistent inflation, high interest rates, restricted credit, and global instability.”¹³

Weakening demand. The Fed’s credit survey found small firms more likely to report revenue decreases than increases for the first time since 2021.¹¹ PwC described consumer spending as “K-shaped,” with middle- and lower-income households increasingly strained.⁵ The NFIB Optimism Index came in at 95.3 in May 2026, below its 52-year average of 98, and capital spending plans dropped to their lowest level since March 2009.¹²

Tariffs. PwC identified tariff policy as a “disruptive variable in 2026,” with high import rates raising input costs and disrupting supply chains, especially in consumer products and industrials. Because retailers often procure inventory six to nine months ahead, businesses absorbed tariff costs before they could pass them on to customers.⁵ The Joint Economic Committee (Minority) found the smallest businesses lost 4.5 times more jobs in 2025 than during the pandemic in 2020.¹⁴

Sectors Under the Most Strain

Filings are up broadly, but some industries are absorbing more of the pressure than others.

Restaurants and food service are being squeezed between rising input costs and price-sensitive customers, with PwC reporting margins “growing dangerously thin” for smaller operators while larger chains hold their ground.⁵

Retail and consumer products are caught between tariff-inflated costs and value-conscious shoppers. Coface found retail accounted for a significant share of large insolvencies in the first half of 2025, driven partly by the continuing shift to online commerce.⁶

Real estate has been elevated for three consecutive years, with higher interest rates and remote-work trends fueling filings that often involve smaller single-asset properties. Real estate, consumer goods, and energy/industrial companies together accounted for 80% of all Chapter 11 filings in 2025.⁵

Healthcare is facing tighter Medicaid funding and the expiration of enhanced ACA subsidies alongside labor and capital pressures. Automotive suppliers are beginning to show the delayed effects of tariffs on their financials, compounded by uncertainty over the direction of the EV market.⁵

The Subchapter V Debt Limit

One policy detail is shaping which small businesses can even use Subchapter V. The CARES Act temporarily raised the debt cap from roughly $2.75 million to $7.5 million. That expansion was extended several times before expiring on June 21, 2024, and the limit reverted to $3,024,725, the original figure adjusted for inflation.⁷ Businesses with debts between roughly $3 million and $7.5 million are now shut out and pushed into the more expensive traditional Chapter 11 process.

The Bankruptcy Threshold Adjustment Act of 2026, sponsored by Senator Chuck Grassley (S. 3977) and Representative Ben Cline (H.R. 7730), would permanently restore the $7.5 million limit and raise the Chapter 13 filing cap to $2.75 million.¹⁵ The House version has advanced past the Judiciary Committee,¹⁶ but GovTrack, as of mid-2026, projected only a 7% chance of enactment for the Senate bill.

What Forecasters Expect Next

PwC projects “another modest increase in bankruptcy filings in 2026,” noting that some companies will opt for out-of-court restructurings but that the underlying pressures show no signs of easing.⁵ Coface expects insolvencies to remain above pre-pandemic levels through the second half of 2026, with interest rate cuts unlikely to materially ease refinancing costs for most businesses before mid-2026 at the earliest.⁶ Whether Congress restores the higher Subchapter V debt limit will determine how many struggling small businesses can use the streamlined track rather than face the costlier traditional Chapter 11 or simply liquidate.

1
Epiq Global. First Quarter Subchapter V Small Business Filings Increase 67 Over Previous Year
2
American Bankruptcy Institute. Bankruptcy Statistics
3
United States Courts. Bankruptcy Filings Rise 11 Percent
4
Experian. Bankruptcy on the Rise: What the Latest Data Tells Us About Small Business Vulnerability
5
PwC. Restructuring and Bankruptcy Outlook 2026
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Coface. US Insolvencies Rise Above Pre-Pandemic Levels for the First Time
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U.S. Department of Justice. Subchapter V
8
Epiq Global. Total Bankruptcy Filings Increase 11 in Calendar Year 2025
9
American Bankruptcy Institute. First Quarter Subchapter V Small Business Filings Increase
10
Epiq Global. April Commercial Chapter 11 Bankruptcy Filings Increase 42 From Previous Year
11
Federal Reserve Banks. 2025 Report on Employer Firms
12
NFIB. Small Business Economic Trends
13
Newsweek. Bankruptcies Surge in US
14
Joint Economic Committee. New Data: Trump Tariffs Impact on Small Business Jobs, Revenue
15
GovTrack. S. 3977: Bankruptcy Threshold Adjustment Act of 2026
16
Rep. Ben Cline. Bankruptcy Threshold Adjustment Act of 2026