Business Bankruptcies Just Hit Their Fastest Pace of the Year

Business Filings Are Accelerating

U.S. business bankruptcy filings rose 16.9% in the twelve months ending June 30, 2026, the biggest year-over-year increase since the year ending December 2024, according to the Administrative Office of the U.S. Courts. Total business filings climbed to 26,941, up from 23,043 a year earlier. The 12.2% figure in that release’s headline covers all filings including consumer cases; the business-only subset moved 16.9%. That release loses the attention contest to the Fed’s calendar and the monthly jobs report, and the Courts publish it only four times a year, but it may be the most useful early-warning read available right now, because a bankruptcy filing is a lagging indicator of something that has already been building on somebody’s aging report for months.

Small-Business Distress Is Rising Faster

The acceleration is the real story. Business filings for the twelve months ending December 2025 were up 7.1% year over year. By March 2026, the increase had climbed to 11.4%. By June, it was 16.9%. Three consecutive quarterly readings, each steeper than the last, add up to a trend. Company size matters here as much as the rate of increase. Subchapter V elections, the small-business fast track through Chapter 11, jumped 50% in the first half of 2026 versus the same period in 2025, from 1,107 to 1,663, per Epiq AACER data released with the American Bankruptcy Institute. Subchapter V is a faster, cheaper version of Chapter 11 built for companies too small to justify a traditional Chapter 11’s cost and complexity, and only businesses whose noncontingent, liquidated debts fall at or below roughly $3.42 million qualify to use it. Subchapter V elections are climbing substantially faster than the overall filing count, suggesting that financial distress is becoming increasingly visible among smaller businesses as well. For creditors, that matters because these are often the kinds of customers that can sit quietly inside an ordinary aging report until payment behavior begins to change.

Borrowing costs explain part of the timing. The Federal Reserve has held its benchmark rate at 3.5% to 3.75% since its third cut of 2025 landed in December, and the July 2026 meeting ended in a 9-3 vote to hold again, with three regional presidents pushing to raise rates on inflation that’s stayed above target for years. For a small business leaning on a revolving line of credit to bridge the gap between paying its own suppliers and collecting from its own customers, the level of that rate matters more than its direction. Businesses that became accustomed to financing when the prime rate sat at 3.25% in 2021 now face a prime rate of 6.75% when refinancing or drawing new credit. Subchapter V is increasingly where the ones that can’t absorb the difference land, and Michael Hunter of Epiq AACER tied the 50% rise in Subchapter V elections to higher borrowing costs and softening demand.

The Warning Appears in the Aging Report First

Most companies’ systems label a customer distressed only once a court filing arrives. Internally, it shows up first as a payment that used to land in thirty days now landing in fifty, and as an accounts payable contact who stops returning calls right after a round of vague “restructuring internally” language. Aging reports are good at showing how far past due a balance sits, and a tidy 60-day bucket reads the same whether the customer is slow because of internal process or six weeks from filing. That distinction is exactly where the instinct to wait costs the most. Once a filing happens, trade credit balances land with the general unsecured creditors, who stand behind secured lenders and priority claims in the payout order and collect from whatever is left after those claims are satisfied.

The pattern holds up consistently on the collection side of this. A debtor learns something from every deadline a creditor fails to enforce. When a business lets a 45-day invoice slide to 75 because pressing a customer feels awkward, the customer reads the slide as the real due date. In a rate environment like this one, the gap between stated terms and enforced terms is exactly what’s widening for the accounts closest to the edge, and it’s widening fastest for the smallest ones, because those are the accounts everyone is too stretched to chase personally.

Is It a Slow Payer or a Solvency Problem?

If your aging report has grown a longer tail over the last few quarters and you’re unsure whether that’s a process problem or a solvency problem, that’s worth running down before the account files. The gap between placing a commercial account with a collections partner at 75 days and finding out at a bankruptcy notice is usually the gap between recovering something and recovering nothing. Our free Vital Warning Signs assessment walks through the specific account behaviors that tend to separate a genuinely slow payer from one that’s already gone.

Sources

• Bankruptcies Rise 12.2 Percent (12 months ending June 30, 2026) — https://www.uscourts.gov/data-news/judiciary-news/2026/07/28/bankruptcies-rise-122-percent
• Bankruptcies Increase 11.9 Percent (12 months ending March 31, 2026) — https://www.uscourts.gov/data-news/judiciary-news/2026/04/23/bankruptcies-increase-119-percent
• Bankruptcy Filings Rise 11 Percent (12 months ending December 31, 2025) — https://www.uscourts.gov/data-news/judiciary-news/2026/02/04/bankruptcy-filings-rise-11-percent
• Small Business Filings Increase 50% Year Over Year in First Half of 2026 | Epiq — https://www.epiqglobal.com/en-us/resource-center/news/small-business-filings-increase-50-year-over-year-in-first-half-of-2026
• Subchapter V debt limit | U.S. Trustee Program, Department of Justice — https://www.justice.gov/ust/subchapter-v
• Bank Prime Loan Rate | Federal Reserve H.15 Selected Interest Rates — https://www.federalreserve.gov/releases/h15/
• Fed rate decision July 2026: Divided Fed holds interest rates steady — https://www.cnbc.com/2026/07/29/fed-rate-decision-july-2026.html
• Federal Reserve issues FOMC statement (July 29, 2026) — https://www.federalreserve.gov/newsevents/pressreleases/monetary20260729a.htm