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Although it is probably surprising to most, the pandemic and the related inflation did not give rise to a huge explosion in bankruptcy filings.
In fact, quite the opposite happened: Generous government assistance and relatively easy access to money shielded many businesses and individuals from direct economic harm stemming from the pandemic.
Bankruptcy filings in 2021 were down 23% from filings in 2020, and filings in 2022 were down 28% compared to filings in 2021. In our practice, this makes sense; there is no need to file bankruptcy when there is no immediate collections pressure and easy access to credit.
Yet nothing is free. At least in part as a consequence of the easy access to money, inflation began rising rapidly in March 2021, with monthly inflation peaking at 9.1% in June 2022 before a long, slow decline. The most recent monthly inflation rate in November 2025 was just 2.7% but prices have remained high, creating an affordability crisis for both business and consumers.
Bankruptcy filings are traditionally a lagging economic indicator. We don’t see increased bankruptcy filings for businesses or individuals until people run out of options. And unfortunately, these economic pressures, as well as continuing fallout from the aftereffects of the recent inflationary period, mean that bankruptcy filings have been steadily rising over the past year.
As of this writing, cases in the Southern District of Indiana are up 8.9% compared to last year. Business cases in particular are up 22.4% compared to last year. Nationally, business bankruptcies are at their highest level since 2014 and now have just exceeded pre-pandemic levels.
Why? And what do we see ahead for 2026?
The outlook is not encouraging. The vast majority of economic forecasts predict a continued rise in bankruptcy filings, and we have seen nothing in our practice that leads us to believe otherwise. Here are a few potential pitfalls for businesses and consumers as we move forward into 2026.
Merchant cash advances
This past year in business bankruptcies, we consistently saw small businesses struggle with merchant cash advance loans. Merchant cash advance loans are similar to payday loans for individuals.
MCA lenders purport to “purchase” the future receivables of a business in return for an immediate cash payment. Many MCA lenders then will regularly take money from a business’s operating account with absurdly high interest rates, all disguised as a “purchase” of receivables.
Because of tighter lending criteria and higher interest rates with traditional lenders as well as increased operating costs and the trickledown pressure from tariffs, many smaller businesses that were already struggling with cash flow continue to look to MCA lenders as a solution—and unfortunately, we don’t believe this trend is going to slow down any time soon. We anticipate seeing more MCA debt in business bankruptcy cases for the foreseeable future.
Economic Injury Disaster Loans
Another huge question mark in business lending is the uncertain fallout of Economic Injury Disaster Loans. During the pandemic, many businesses successfully applied and received such loans or advances. Despite defaults, the Small Business Administration has not consistently enforced collection of these kinds of loans.
Indeed, there have been many cases we have filed this year in which there was an active EIDL loan or another SBA loan that the SBA simply ignored. But it would be a mistake to assume that the government will simply write all this debt off. If the SBA begins taking action to collect these loans or sells the loans to third parties to collect on them, there could be a substantial uptick in the number of businesses under financial distress.
Turning to specific industries, the truck industry continues to suffer from a lengthy and historically weak market, dating back to 2022. High freight costs, low demand and now tariffs have contributed to razor-thin margins.
Many trucking companies have shut down completely or have been forced to reorganize in Chapter 11. There is no immediate sign that the market is improving, and we anticipate that we will continue to see trucking companies of all sizes struggle.
There is also a significant risk of an increase in farm bankruptcies. Indiana has a large number of soy farmers. Like other businesses, those farmers are facing higher costs for farming inputs; but now, they are also facing the fallout of tariffs that have caused international purchasers—particularly China—to look to other markets. This will be the third down season for soy farmers.
President Trump has promised $12 billion in assistance to farmers to help address the impact of the tariffs, but it is currently uncertain whether that will be enough or whether there will be a long-term solution to farmers’ troubles.
Turning to consumer debtors, non-mortgage loan defaults have been on the rise as short-term debt incurred because of higher costs starts to put pressure on average Americans. Automobile loan defaults, already incurred at higher interest rates than in the last decade, are rising, as are consumer credit card defaults.
Even in households with no defaults, higher prices have depressed consumer spending, leading to challenges for businesses. Most alarmingly, student loan defaults have skyrocketed, again reflecting increased living costs, recent changes in available loan repayment plans and a significant amount of confusion regarding loan forbearances.
Lastly, we have anecdotally seen an increase in personal and business cases related to gambling or that include significant gambling debt. We expect to see more of these considering the 2019 legalization of sports betting in Indiana and the ease of access to gambling apps.
For attorneys, the message is clear: 2026 will demand close attention to clients who may be quietly struggling. The businesses and individuals who weathered the pandemic with emergency loans and easy credit might now find themselves at a crossroads.
Early intervention—whether through restructuring, a work-out or bankruptcy planning—will be essential to helping clients navigate what promises to be a challenging year ahead.•
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Mizzell is an associate at Kroger Gardis & Regas LLP. Opinions expressed are those of the author.
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