Many businesses are falling behind on rent, vendors, and loan payments and assuming they are the only ones. They are not. U.S. business bankruptcy filings are on the rise. Here are 10 numbers worth knowing in 2026.
How Many U.S. Companies Had Filed for Bankruptcy
The first is 512. As of Sept. 30, 2024, that’s how many U.S. companies had filed for bankruptcy in calendar 2024.
The second is 504. That 2024 count was higher than at the same time - the end of the third quarter - in 2023: 504.
The third is 518. And 512 is also close to the 2020 year-end tally, which was 518. The peak in 2020 was widely seen as a result of COVID-19. It’s on pace to be higher than the final tallies for 2023 and 2020. Those were the latest numbers at the time, and they set the scene for 2026 if your small business is behind with its bills. Why are more companies filing for bankruptcy? The list includes rising inflation, higher interest rates, low consumer confidence and geopolitical uncertainty. All of these conditions can make it harder for a business to stay afloat.
Many of the businesses behind those filings ran into trouble because the market wasn’t exactly booming. In some cases, that trouble could mean there was less customer demand, consumer preferences shifted, or that the product or service became obsolete. In others, perhaps small businesses aren’t as nimble and sophisticated as their competitors, adjusting their offerings or price points faster than an unsuspecting small business, or leveraging analytics to siphon market share away. Small companies can also get into trouble because they have more cash flowing out of the business than coming in. Shortfalls can come with rapid growth, but bloated inventory, slow-paying customers and bad debts are often the warning signs before a filing. Sometimes it could be the result of poor debt management, with the small business owner borrowing money to get out of a cash flow pinch, but the costs associated with interest payments and perhaps a few other things snowball and cause the business to falter. Still other times it could be the result of poor management, with no one experienced enough to take the reins and steer the business in the right direction. Or the business falls victim to fraud, whether an online scam, a cyberattack or even embezzlement. With less cash reserves than larger companies, small businesses may have a harder time recovering from fraud.
Chapter 11 of the U.S. Bankruptcy Code
The fourth number is 11, because it’s the bankruptcy chapter under which a business keeps its doors open while restructuring its debt. It’s the most common chapter; the lack of an income test means it’s pretty flexible. So-called Chapter 7 bankruptcy entails the liquidation of the business’s assets, and creditors typically receive little or nothing. Chapter 13 is only for wage-earners, the self-employed, and sole proprietors. It means paying off all of the secured debts - such as car loans and mortgages - in full.
The fifth is four months, roughly the time a business would have to come up with a plan to restructure its finances under Chapter 11 of the U.S. Bankruptcy Code. The case is begun one of two ways: By voluntary petition of the debtor, or by involuntary petition of creditors, once certain conditions are met.
The sixth is 18 months. The court has the power to extend that period up to 18 months if the debtor shows “just cause” for the delay. The judge decides whether a debtor is eligible to file and whether the debtor is discharged of its debts. The court appoints trustees to oversee the process.
The seventh is $2.75 million. Historically, Chapter 11 was too difficult and expensive. Today, it’s a little easier under the Small Business Reorganization Act (SBRA) of 2019. Subchapter V of Chapter 11 allows six changes to the process for a business debtor who has no more than $2.75 million (indexed for inflation) in secured and unsecured debts. It’s streamlined, removing some procedural requirements and reducing costs. Only the business debtor can propose a plan. There’s no unsecured creditors committee unless a court orders it.
The eighth is 60 days: the court will hold a status conference within 60 days of the filing of the petition. A standing trustee will be appointed. This is the trustee of the bankruptcy estate. The standing trustee will oversee the reorganization. Now a small business debtor may defer administrative expense claims over the course of the plan. Before it would have to pay on the plan’s effective date.
Two other changes matter to owners. SBRA eliminates the “new value” condition: Equity security holders in a small business debtor are no longer required to contribute “new value” to the debtor in order to retain their equity interest without paying creditors in full. Instead, the plan must be nondiscriminatory and “fair and equitable.” Like in Chapter 13, all of the debtor’s projected disposable income must be applied to payments under the plan or the value of property distributed under the plan must not be less than the debtor’s projected disposable income. SBRA eliminates a bar on small business debtors modifying residential mortgages, allowing the debtors greater flexibility to modify them if the mortgage was used primarily to finance the small business. Otherwise the secured lenders retain the same protection as in other chapter 11 cases.
The ninth is three years. Under the SBRA, courts must now grant a debtor’s discharge after it makes payments for the first three years, or up to five years if ordered by the judge. Discharge allows the debtor to be relieved of personal liability for the entirety of its debts under the plan, with some exceptions.
The tenth is $3,024,725. The debt threshold under Subchapter V was temporarily increased in other legislation passed during the pandemic. Currently, the inflation adjusted debt threshold is $3,024,725 for cases filed after June 20, 2024.
Bankruptcy is a formal legal proceeding for a business that can’t meet its obligations. It’s a way to get a “fresh start” (you’ve probably heard that phrase before). That is for a business that is no longer viable; for one that still has a future, Chapter 11 typically restructures its debts while protecting business assets. Learning a little about the topic can help you feel more comfortable talking about it and make better decisions if it becomes an issue.
About Delancey Street
Delancey Street is a premier, and award winning, business debt settlement company that helps business owners nationwide. Our goal is simple: help you escape debt in a safe and legal manner. Based out of New York, we can help in 49 of 50 states. We tell you how it is; because your business and future is on the line.
