Commercial Chapter 11 Bankruptcy Filings Decrease Annually

There were 666 commercial Chapter 11 bankruptcy filings made in the United States in July, a 27 percent drop from a year ago, according to the American Bankruptcy Institute (ABI).Chapter 11 bankruptcy allows a business to reorganize its debts so it can continue operating and eventually become solvent. In addition to a decline in Chapter 11 filings, overall commercial bankruptcy filings declined in July, falling by 8 percent year over year, ABI said in an Aug. 6 statement.The decline in July’s commercial filings followed improved economic conditions in June. The 12-month inflation rate declined in June from the previous month after surging for three consecutive months.According to a July 24 report from S&P Global, U.S. business activity growth accelerated to an eight-month high last month, with business confidence in the year-ahead outlook rising to an eight-month high as well.ABI clarified that although the number of Chapter 11 filings fell this year, more than 300 filings were made in connection with a large healthcare system’s bankruptcy.Meanwhile, despite the overall decline in Chapter 11 filings, subchapter V bankruptcy elections within Chapter 11, which represent filings by small businesses, rose 24 percent in July from a year earlier.This is despite an improvement in small business optimism in June, according to a July 14 statement from the National Federation of Independent Business (NFIB).NFIB chief economist Bill Dunkelberg said in the statement that lower fuel costs provided relief for businesses, with companies expecting operating conditions to improve over the coming six months.“While there have been improvements in the overall environment, high interest rates and modest economic growth are causing owners to approach hiring and capital spending with caution,” Dunkelberg said.Total subchapter V elections in July totaled 234 filings, ABI said in its recent statement.Amy Quackenboss, ABI executive director, said in the statement that bankruptcy serves as a “critical safeguard” for businesses to reorganize their finances and move forward under conditions of financial distress.“ABI appreciates the continued efforts of Congress to permanently expand access for both distressed small businesses looking to restructure under subchapter V and for consumers looking to file under chapter 13,” Quackenboss said.Quackenboss was referring to the Bankruptcy Threshold Adjustment Act of 2026 introduced in the Senate by Sen. Chuck Grassley (R-Iowa) in March.The Act seeks to permanently raise the small-business Chapter 11 bankruptcy debt threshold to $7.5 million. This threshold is the maximum debt limit a business can have when applying for such bankruptcy.On Aug. 3, the Senate passed the bill. The legislation now heads to the House of Representatives for approval.In an Aug. 4 statement from Grassley’s office, the lawmaker commended the Senate for unanimously passing the Act.“Our nation’s bankruptcy code should work for Americans, not against them,” Grassley said in the statement, while calling on members of the House to quickly pass the legislation.“By eliminating barriers to reorganization and restoring modern debt limits, the bipartisan Bankruptcy Threshold Adjustment Act would provide American families and small businesses the tools they need to regain their financial footing in a quicker, more streamlined process.”The bill also seeks to raise the debt limit for Chapter 13 filings by individuals to $2.75 million.Meanwhile, the Trump administration has taken action to ensure businesses have access to sufficient financing to operate.On July 4, a new policy went into effect that allows businesses to secure up to $10 million by combining two Small Business Administration (SBA) loan programs—7(a) and 504 loans.The 7(a) loan program provides financial assistance of up to $5 million, while the 504 loan program has a maximum limit of $5.5 million. Previously, a business could only take $5 million cumulatively from both initiatives. The new update effectively doubles this threshold.On July 30, the SBA announced that it would update its website to make it more helpful to small businesses and manufacturers.The update offers a streamlined online lending process for businesses that “simplifies how lenders originate and process SBA‑backed loans, helping them deliver capital to Main Street businesses faster and with greater consistency and security,” the SBA said.