Bankruptcy Filings Rose 12% in June While 2025 Job Growth Was Revised To Nothing

Personal bankruptcy filings in the United States rose 12% in June 2026 against the same month a year earlier, according to Jay Zagorsky, an associate professor of business at Boston University, writing in The Conversation ^[1][18]. That follows more than 500,000 filings in 2025, nearly 50% above the 2022 total ^[2], and it lands in a labour market that, on revision, produced no job growth at all last year ^[5].

Take the base effect seriously first. Naked Capitalism's Yves Smith notes the rise is coming off a low post-Covid base ^[4], and the arithmetic bears that out: if 2025's figure is roughly 50% above 2022, the 2022 count was somewhere near 335,000 ^[3]. A cycle that starts from a suppressed base can climb for a long time before the level looks alarming. What matters for anyone underwriting consumer credit is the direction and the accompanying macro data, not the absolute count.

On that, the picture is worse than the growth headlines suggest. Smith writes that early 2026 revisions erased 2025 job growth entirely ^[5], that the most recent employment release showed a contraction plus downward revisions to earlier months ^[6], and that inflation has been compressing real incomes ^[7]. Filings are a lagging, last-resort number: bankruptcy generally means liquidating assets or entering a court-supervised repayment plan, initiated by a petition to a federal court that appoints a trustee ^[14]. People arrive there months or years after the cash flow problem starts.

They also arrive there with negative equity in aggregate. Filers in 2024 held about $75 billion in assets against roughly $86 billion owed, an $11 billion gap ^[8]. Assets therefore covered about 87% of liabilities before any exemption is applied ^[9], and the recoverable share varies enormously by state: Texas places no limit on protected home equity, while Arkansas caps it at $800 and Kentucky at $5,000 ^[13]. Loss-given-default on unsecured consumer paper is a function of the debtor's postcode as much as their balance sheet.

Two structural points cut against reading filings as a clean distress signal. Smith argues that credit card lenders will often accept a sizeable write-off when a lawyer makes clear the alternative is a filing, in part because they want reported bankruptcy and default numbers kept down, since high levels alarm investors and can raise funding costs ^[15][16]. If that is right, the settlement channel absorbs stress that never appears in court statistics, and the published filing count understates the underlying deterioration rather than exaggerating it. Second, a discharge frees up less cash flow than it appears to. Nineteen categories of debt survive bankruptcy, including alimony, child support and most taxes ^[11], and student loans are dischargeable only with difficulty and never automatically ^[12]. Post-filing households remain constrained customers.

What to watch: whether the monthly year-over-year filing rate holds near 12% or accelerates through the second half of 2026 ^[1]; whether payroll revisions keep coming in negative after the contraction already reported ^[6]; and whether card issuers' funding costs move, which is the mechanism by which consumer distress stops being a collections problem and becomes a lending-capacity problem ^[16]. Smith's own expectation is that intensifying inflation and further real-economy breakage make higher filings likely ^[17]. That view is hers, not a consensus forecast, but the labour data revisions are not in dispute ^[5][6].