Chapter 7 Individual Bankruptcies in April Rise by 16 Percent Year Over Year

Total individual and businesses bankruptcies are up by 9 percent from last year.

A person arrives at the U.S. District Bankruptcy Court for the Southern District of New York in Manhattan, on Jan. 9, 2020. Brendan McDermid/Reuters

Chapter 7 bankruptcy filings by Americans rose by 16 percent year-over-year to hit 30,961 filings in April, the American Bankruptcy Institute (ABI) said in a May 2 statement.

Total bankruptcy filings, which include submissions from both individuals and businesses, were up by 9 percent on an annual basis.

When an individual resorts to Chapter 7 bankruptcy, the court assesses the value of his or her assets and sells or applies them to pay off as many outstanding debts as possible. Any remaining debt is canceled. The individual is allowed to keep some assets that are exempted from the process.

“The 9 percent increase in total bankruptcy filings in April 2025, particularly the 16 percent surge in individual chapter 7 filings, reflects the mounting financial strain on households, elevated prices, and higher borrowing costs,” Michael Hunter, vice president of bankruptcy data provider Epiq AACER, said in a statement.

While individual bankruptcy filing numbers jumped in April, the country’s overall economic situation has improved over the past months, according to employment and inflation data.

In April, the U.S. economy added 177,000 new jobs, which followed 185,000 additions in March, according to data from the Bureau of Labor Statistics (BLS).

White House press secretary Karoline Leavitt was quoted in a May 2 White House Fact Sheet as saying: “This is the second month in a row where the jobs report has beat expectations. Wages are continuing to rise and labor force participation is increasing. This is exactly what we want to see. More Americans working for higher wages. More winning is on the way!”

Meanwhile, according to BLS data, the 12-month annual inflation rate dipped to 2.4 percent in March, equaling the September 2024 low. Since June 2024, the inflation rate has remained at or below the 3 percent level, easing price pressure on customers.

A Gallup survey published on April 30 shows that 29 percent of Americans cited inflation or the high cost of living as the most important financial issue facing their families. That is down from 41 percent last year.

Commercial Bankruptcy, Private Equity

According to the May 2 ABI statement, overall commercial bankruptcy filings made by businesses decreased by 12 percent in April on an annual basis.

There was a 4 percent growth in subchapter V business filings, which “highlights the ongoing challenges for small businesses seeking relief, pointing to a broader need for accessible restructuring options,” according to Hunter.

There are concerns about the role of private equity investments in business bankruptcies.

In an April 25 post, the Private Equity Stakeholder Project (PESP), a nonprofit watchdog, found that there was a “disproportionate number” of private equity-owned businesses involved in bankruptcies during the first quarter of 2025.

After analyzing bankruptcies of companies with more than $1 billion in liabilities, PESP discovered that seven out of 10 bankruptcies were of businesses owned by a private equity company, even though private equity only makes up 6.5 percent of the U.S. economy.

“This continues a troubling trend: in 2024, private equity-backed companies comprised 11 percent of all bankruptcies and 54 percent of large bankruptcies (those with over $1 billion in liabilities),” PESP stated. “Just three months into 2025, the industry is already outpacing that track record.”

According to PESP, private equity firms focus on short-term gains and rapid value extraction from businesses they invest in, thereby risking the long-term sustainability of the entities.

Focusing on rapid financial gains can result in “significant mismanagement” and instability, thereby pushing up bankruptcy rates among private equity-owned businesses.

“Bankruptcies are a key bellwether signaling the broader risks associated with private equity investments. For investors and the public alike, bankruptcy trends mark a critical moment and highlight the industry’s need for regulation and transparency,” according to the nonprofit.