By Andrew Miller
Ongoing financial pressures have caused a notable rise in Subchapter V bankruptcies for small businesses this year.
Amy Quackenboss, Executive Director at the American Bankruptcy Institute, points to the causes: “Higher borrowing costs, increasing expenses, and geopolitical volatility are leading more debtors to turn to the bankruptcy system to restructure obligations and pursue a financial fresh start.”
The strain isn’t only on the businesses themselves.
Michael Hunter, vice president at Epiq, the firm that compiled the filing data, explained that individuals are falling behind on their own bills.
Auto loan delinquencies sit near multi-year highs, foreclosures have risen, and growing credit card debt is pushing more people into bankruptcy. When customers are stretched that thin, the businesses they buy from feel it next.
Subchapter V is a fast-track version of Chapter 11, the part of the bankruptcy code built for reorganizing debt rather than shutting down. It was created specifically to allow small businesses to move through the court process faster and cheaper than a standard case.
More importantly, it lets an owner keep running their business the whole time instead of losing control to a court-appointed trustee.
Bankruptcies filed under Subchapter V rose 50% in the first half of 2026, from 1,107 to 1,663 compared to the same stretch last year.
P.S. Higher costs and slower payments put pressure on even healthy businesses.
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