Things were bad in 2020. The COVID pandemic started, causing a lot of businesses to shut down. People lost their jobs. Many people had to deal with the loss of loved ones who died from the disease.

The economy was terrible back then, and now it seems like things may be as bad as they were before. The number of Americans considering bankruptcy is soaring to its highest level since just before the pandemic. This is an alarming sign.

The Rising Tide of Bankruptcy

Bankruptcy filings climbed 13.1% year-over-year in the 12 months ending March 31, 2025, according to the U.S. Courts - totaling 529,080 cases versus 467,774 the prior year.

Inquiries about consumer bankruptcy surged in the first three months of 2025, based on data from LegalShield, which provides consumer legal services. This could create a wave of bankruptcy filings later on in the year as debt and tariffs fuel inflation.

While personal bankruptcy filings in the United States averaged about 750,000 a year before the pandemic, they actually decreased sharply during the pandemic itself, thanks to trillions of dollars in government aid.

Bankruptcies are expected to surge this summer as consumers contact lawyers and ask about their options for handling debt, as well as the process of filing for bankruptcy. Years of stiff inflation, higher interest rates, and high levels of debt are squeezing Americans' budgets. This is noted by increased billing disputes and debt collections.

Inflation is Squeezing Budgets

High inflation erodes disposable income, forcing families to rely more heavily on credit. As credit costs escalate, more face unmanageable debt levels. Americans are increasingly unable to pay all their bills. They are wondering which ones to prioritize. They are asking what they can do to hold onto their cars and other assets. There is a lot of concern about debt.

At the end of 2024, total household debt hit an all-time high of $18 trillion. Last year, the percentage of Americans falling behind on their debts also increased.

Tariffs Are Adding Pressure

A wave of new tariffs in 2025, impacting steel, aluminum, autos, textiles, electronics, and more, has pushed the effective U.S. tariff rate to roughly 20–27% at times - the highest since the early 1900s.

Analysts estimate these tariffs alone have raised consumer prices by 2–3% in the short term—translating to a loss of $2,100 to $3,800 per household.

Many lawyers are hearing from consumers ready to file for bankruptcy now. That is because tax season is now over for the most part, and people have gotten their refunds. They have money to pay lawyers and file for bankruptcy. Yes, ironically, it takes a good chunk of money to file for bankruptcy.

Economic policies, including heavy tariffs on China and other countries, are likely to increase inflation even more. However, those considering bankruptcy have likely been struggling with their finances for a while now. Things tend to get worse month after month, and when it starts building up, consumers need to take action.

So this begs the question: When should you file for bankruptcy? Bankruptcy should come after a prolonged period of financial stress. However, experts recommend filing for protection sooner rather than later. It makes sense to file when you're in the hole, but it doesn't provide income.

Can't pay your bills? Digging deeper into debt? Contact a law firm that specializes in bankruptcy.  It's crucial to have a knowledgeable and experienced lawyer by your side. They can  ensure you understand your options and make the best decisions for your financial future.