Small business bankruptcy filings under Subchapter V rose 50% year over year in the first half of 2026 — 1,663 filings versus 1,107 during the same period in 2025 — according to new data from Epiq AACER, the leading provider of U.S. bankruptcy filing statistics, released via GlobeNewswire on July 8.
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What happened
Subchapter V is the streamlined Chapter 11 bankruptcy track created for small businesses. Its 50% year-over-year jump far outpaced the broader bankruptcy trend: total U.S. bankruptcy filings across all types rose 12% in H1 2026 (310,550 filings versus 276,306 in H1 2025), while commercial Chapter 11 filings overall — a broader category that includes larger businesses — rose 28% (4,589 versus 3,595).
"The 50% rise in Subchapter V elections underscores the mounting challenges facing small businesses amid higher borrowing costs and softening demand," said Michael Hunter, Vice President of Epiq AACER, in the release. Separately, American Bankruptcy Institute Executive Director Amy Quackenboss pointed to a wider set of pressures: "Higher borrowing costs, increasing expenses, and geopolitical volatility are leading more debtors to turn to bankruptcy."
Other stress indicators cited alongside the filing data include auto loan delinquencies near multi-year highs, rising foreclosure activity, and growing credit card debt loads — signs that the pressure on small business owners isn’t limited to their business balance sheets.
Why it matters
A 50% jump in small-business bankruptcy elections in six months is a sharp move, not a gradual drift. It’s a leading indicator that credit conditions and demand softness are hitting the smallest, least-capitalized businesses hardest — the ones with the least room to absorb a bad quarter or two of higher borrowing costs.
What this means for small business owners
Bankruptcy data is a lagging signal of financial distress that usually built up over months. The practical takeaway isn’t the headline number — it’s making sure your own business isn’t quietly tracking toward the same pressures Epiq is describing:
- Watch your debt service coverage, not just your balance. Higher borrowing costs mean the same loan balance costs more to carry than it did a year or two ago. If your interest expense as a share of revenue has crept up without you re-running the numbers, now’s the time.
- Separate softening demand from a cash-timing problem. A slow month can look like a crisis if your books aren’t current — clean, current bookkeeping is what lets you tell the difference between "sales are actually down" and "a few invoices haven’t cleared yet."
- Get ahead of a Subchapter V conversation, don’t wait for one. Subchapter V exists specifically because small businesses often wait too long to seek help. If cash flow forecasting has been more guesswork than process lately, that’s the fix to make before a lender or landlord forces the issue.
"The 50% rise in Subchapter V elections underscores the mounting challenges facing small businesses amid higher borrowing costs and softening demand." — Michael Hunter, VP, Epiq AACER
The bottom line
A 50% jump in small-business bankruptcy filings in six months is a real signal about the credit and demand environment small businesses are operating in right now — not just a statistic. The businesses least likely to become part of next year’s number are the ones with current books, a real handle on debt service costs, and cash flow forecasting that’s more than a gut check.
