US Companies’ Chapter 11 Bankruptcies Jump 20 Percent: Report

Inflation, elevated interest rates, and geopolitical tensions have weighed down on businesses.

An arrow points to the U.S. District Bankruptcy Court for the Southern District of New York in Manhattan, on Jan. 9, 2020. Brendan McDermid/Reuters

More companies filed for Chapter 11 bankruptcy protection in March than a year ago, indicating economic stress among U.S. businesses, according to the American Bankruptcy Institute (ABI).

“Commercial Chapter 11 bankruptcy filings increased 20 percent in March 2025, with filings climbing to 733 from the 611 filings registered in March 2024,” ABI said in an April 3 statement. Small business filings fell 1 percent year over year, while total commercial filings rose 10 percent.

The 20 percent jump in Chapter 11 filings “signals persistent economic pressure, mirrored by a 10 percent increase in total commercial filings,” said Michael Hunter, vice president of bankruptcy data provider Epiq AACER.

Individual filings jumped 13 percent last month. Hunter said credit card delinquencies are close to a 10-year high, with factors such as interest rates and debt burdens contributing to the problem.

Delinquency rates in the Federal Housing Administration mortgage portfolio have risen to 11 percent, “surpassing pre-pandemic levels,” he said.

“Adding to this, government job layoffs threaten to exacerbate financial instability for federal workers reliant on stable income to service debts.”

Last month, ABI executive director Amy Quackenboss said geopolitical tensions, elevated interest rates, tighter lending terms, and inflation were creating more challenges for both businesses and individuals who are financially distressed and looking to ease down rising debt burdens.

“Bankruptcy provides an established process for struggling households and businesses looking to access a financial fresh start,” she said.

One well-known company that filed for bankruptcy last month was OTB Holdings LLC, owner of the On the Border Mexican Grill & Cantina chain of Tex-Mex restaurants.

In a court filing, chief restructuring officer Jonathan Tibus said the restaurant chain’s operations had been negatively affected by macroeconomic factors over recent years.

“Casual dining restaurants are acutely impacted by consumer sensitivities to eating out versus staying in. And because of inflationary pressures, restaurant menu prices across the industry have risen significantly faster than grocery and other consumer prices,” the court filing said.

On March 25, 23andMe, a company offering genetic testing services, filed for bankruptcy protection, seeking to sell off its assets amid financial difficulties.

Corporate Bankruptcies

U.S. corporate bankruptcies jumped to a 14-year high in 2024, according to a Jan. 7 report from S&P Global. S&P analysis only takes into account bankruptcies involving large businesses with certain asset and liability thresholds.

There were 694 such corporate bankruptcies last year, up from 635 in 2023 and 372 in 2022. Some of the well-known bankruptcy filings were made by Tupperware Brands Corp., Party City Holdco Inc., Spirit Airlines, Big Lots Inc., and Steward Health Care System LLC.

The consumer discretionary sector saw the largest number of filings, followed by industrials, healthcare, consumer staples, and information technology.

“Businesses continued to face pressure in 2024 from elevated interest rates, especially as total debt among credit-rated nonfinancial U.S. companies reached a quarterly record of $8.453 trillion and interest coverage remained weak in the third quarter of the year,” the report said.

Last month, credit monitoring company Creditsafe published a study revealing that, while clients’ erratic payment practices are often highly indicative of their financial distress and bankruptcy risk, only a few businesses knew how to identify such red flags.

Just 3 percent of businesses were found to be accurately spotting signs of trouble after analyzing clients’ payment behaviors. The company said this is crucial since sudden shifts in customer payment behavior tend to occur prior to bankruptcy.

Steve Carpenter, Creditsafe’s chief operating officer handling North American operations, said the study highlights the need to give finance teams proper training to tackle the issue.

“It’s not just about why it’s important to regularly review and analyze the historical trade payment data of customers. While that’s very important, it’s also necessary to provide helpful tips and training, so finance teams can accurately identify problematic patterns that are indicative of cash flow issues and an increased likelihood of late payments over time,” he said.

“Otherwise, businesses will continue to miss and misread clear red flags—costing them dearly in terms of the amount of time it takes to chase unpaid invoices and the negative impact it has on the bottom line.”