Small-business bankruptcy filings surge in first half

Bankruptcy filings were up across the board in the first six months of the year, but the rise in small-business filings stood out.

Subchapter V bankruptcies—a special type of Chapter 11 filing for small businesses that the Small Business Reorganization Act created in 2019—were up 50% YoY in the first half, according to the American Bankruptcy Institute (ABI) and bankruptcy-data provider Epiq AACER. Subchapter V filings increased 28% YoY in June alone.

Total bankruptcy filings grew 12% compared to the first half of 2025, to 310,550. Commercial filings increased 13%, to 17,825, and commercial chapter 11 filings increased 28%, to 4,589, according to the data.

“The increase in bankruptcy filings over the past year, particularly among small businesses, reflects ongoing financial pressures facing households and employers,” Amy Quackenboss, executive director of ABI, said in a news release. “Higher borrowing costs, increasing expenses, and geopolitical volatility are leading more debtors to turn to the bankruptcy system to restructure obligations and pursue a financial fresh start.”

Subchapter V currently caps eligibility at $3.4 million. Legislation introduced in the Senate would raise that to $7.5 million—a temporary increase in the threshold set by the CARES Act in 2020. The Bankruptcy Threshold Adjustment Act of 2026 would restore that limit, which expired in June 2024.

The uptick in subchapter V small-business filings “underscores the mounting challenges facing small businesses amid higher borrowing costs and softening demand,” Michael Hunter, VP of Epiq AACER, said in the release.

This is just the latest signal that many small businesses aren’t feeling so hot right now. As CFO Brew reported last month, small businesses “were more pessimistic in May and maintained historically high feelings of uncertainty,” according to the latest National Federation of Independent Business Small Business Economic Trends report.