Bankruptcy inquiries are still way down from 2008 financial crisis
April 17, 2025
Key takeaways:
- Americans making legal inquiries for declaring bankruptcy reached their highest levels in the first quarter of 2025 since 2020.
- Tariffs, sky-high debt, costlymortgages and a weak housing market are driving more Americans to bankruptcy.
- There is a high risk of a surge of bankruptucies this summer.
There aremore Americans considering filing for bankruptcy than since the pandemic, following debt and tariffs reaching new heights.
An indexfrom legal-service provider LegalShield reached a level of 36.4 in the first quarter of 2025, compared with the previous highest level of 42.2in the first quarter of 2020.
The index is based on a survey of more than 35 million legal requests.
Still, the index is way down from the bankruptcies during the 2008 financial crisis.
“Consumer bankruptcy concerns are rising not because of short-term volatility, but due to sustained financial pressure on household budgets,”Matt Layton, LegalShield senior vice president of consumer analytics, told ConsumerAffairs.
A combinationof high debt, costly mortgages, tariffs and a weakening housing market are driving Americans to consider filing for bankruptcy.
The share of households more than 90 days late on credit cards and car loans hit a 14-year high at the end of 2024, according to The Federal Reserve Bank of New York, and delinquencies are still climbing.
Credit card balances also hit a record high of $1.21 trillion, the New York Fed said.
“When inflation remains high and credit tightens, bankruptcy becomes the last resort for more and more households,” Layton said.
Job growth has been strong and tax refunds have been higher in 2025, but rising pricesfrom tariffs may lead to more bankruptcies.
“Tariffs are amplifying that pressure by driving up costs on everything from food to construction materials,” Layton said.
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