Mom-and-pop businesses are facing a record number of bankruptcies, raising alarms about the economic policies impacting America’s backbone.
Story Highlights
- Subchapter V bankruptcies for small businesses hit a record high in 2025.
- Over 2,200 filings were reported, marking an 8% increase from the previous year.
- Economic pressures from high borrowing costs and trade policies are contributing factors.
- Changes in debt limits haven’t curbed the rise in bankruptcy filings.
Record High Bankruptcies for Small Businesses
In 2025, small businesses across America experienced a record number of bankruptcies, with over 2,200 filings under Subchapter V rules. This program, initiated in 2020, was designed to assist small businesses with debts under $7.5 million by offering a quicker, more cost-effective bankruptcy process.
However, despite these intentions, filings have surged by more than 8% compared to the previous year, signifying growing financial distress among these businesses.
The popularity of the Subchapter V program underscores the financial challenges faced by small businesses. Initially, it aimed to streamline the bankruptcy process for smaller entities, enabling them to avoid the costly, lengthy traditional court procedures.
Yet, in 2024, the debt limit was reduced to about $3 million, complicating access for larger small businesses. Despite this, the number of filings continues to rise, indicating persistent economic pressures.
Mom-And-Pop Business Bankruptcies Hit A Recordhttps://t.co/QAXcwb0s0n
— QuintusCurtius (@QuintusCurtius) December 2, 2025
Economic Pressures Fueling the Crisis
Several factors contribute to the increasing bankruptcy rates among small businesses. High borrowing costs are a significant burden, complicating these enterprises’ efforts to manage their finances effectively.
Additionally, cautious consumer spending and the Trump administration’s ongoing trade policies have put extra pressure on earnings, causing business owner optimism to plummet to a six-month low in October 2025.
These economic conditions are not only reflected in Subchapter V cases but also affect Chapter 11 bankruptcies, typically used by larger businesses and wealthy individuals.
While Chapter 11 petitions have risen by about 1%, the faster growth in Subchapter V cases highlights the unique vulnerabilities faced by smaller businesses.
Broad Implications for Small Business Owners
The rise in bankruptcies has broad implications for the economy and the livelihood of countless Americans who depend on small businesses. As these enterprises struggle to stay afloat, there is a growing need for policies that genuinely support small businesses without overburdening them with complex regulations and financial hurdles.
With more than 180,000 Chapter 13 consumer bankruptcy cases filed this year—a nearly 5% increase—it’s clear that individual financial distress is also on the rise.
This trend highlights the interconnectedness between small businesses and consumer financial health, underscoring the need for comprehensive solutions to stabilize the economic foundation of American society.
