Economic trends are of great interest to me as an attorney to financial institutions. Over the past year, I’ve been particularly interested in why so many households and businesses are feeling squeezed. Bankruptcy filings have moved higher, inflation persists thanks, in part to tariffs, and policymakers are now debating a dramatic cap on credit-card interest that could reshape access to consumer credit. , tariffs are adding nontrivial costs, and policymakers are now debating a controversial cap on credit-card interest that could reshape access to consumer credit.
1) What the numbers say about bankruptcy
Looking at figures compiled by Epiq AACER, the rise in filings is clear in the data. There were 565,759 total filings in 2025. That’s 11% more than in 2024. Consumer bankruptcy filings totaled 533,949, or 12% more than in 2024. Commercial filings rose 5% to a total of 31,810.
Bankruptcies had fallen from their 1.5 million filings in 2010, as casualties of the Great Recession, to 757,816 in 2019. Then came the pandemic, including moratoria on foreclosures and evictions, softer collection practices, and an infusion of free money from the government. As a result, we still have not returned to the pre-Covid level of filings, which hit a low of under 390,000 in 2022. Increases like the one we saw last year are more evidence of the burden both consumers and businesses are facing.
Chapter 7 bankruptcies, often referred to as straight liquidations, rose 15% in 2025. Their sharp rise is a telling signal that more households are exhausting options short of liquidation — in other words, financial distress is becoming acute for a growing share of the population.
2) Inflation: Still sticking around and impacted by tariffs
Americans face prices that remain elevated from pre-pandemic levels. The Bureau of Labor Statistics reports that inflation in the United States rose 2.7% over the 12 months ending December 2025, and core inflation (excluding food and energy) was 2.6%, roughly in the same range.
While a 2–3% annual pace sounds reasonable compared with the double-digit months of not so long ago, it still means consumers are paying more for essentials like housing, groceries and medical care — and wage growth has not uniformly caught up. That gap contributes to higher default risk and, ultimately, more bankruptcy filings when households face shocks.
Tariff policy is frequently discussed in strategic or political terms, but it has a mechanical effect on prices. They operate like an added cost-of-goods tax. For firms that rely on imported inputs, tariffs raise production costs; for consumers, tariffs raise the retail price of affected products. In combination with other cost pressures, that incremental inflation contributes to both narrower margins for businesses and reduced purchasing power for households.
The Federal Reserve measures price changes for consumer goods and services with the Personal Consumption Expenditures inflation gauge. In statistics released mid-2025, tariffs added about one-half of a percentage point to inflation. Since that could raise 2.5% inflation to 3.0%, tariffs are not negligible.
3) The proposed 10% cap on credit-card APRs: an economic disaster?
The current debate over imposing a 10% cap on credit-card APRs is consequential. While the policy’s path and practical effects remain uncertain, the market participants, and banks in particular, view the cap as capable of materially changing how and to whom lenders extend credit.
Academic and industry estimates differ on the net outcome. A hard cap would lower interest costs dramatically for those borrowers who keep access to cards (reducing interest expenses and potentially preventing some bankruptcies), but it would also incentivize lenders to cut lines or exit riskier borrower segments — potentially leaving many households with fewer safe credit options.
Jamie Dimon, CEO of JPMorgan Chase, is more blunt about it. He predicts an “economic disaster” if the cap was required by law. He estimates up to 80% of Americans would have their access to credit eliminated or at least extremely curtailed. Without available credit to those with riskier profiles, consumer spending would decrease sharply.
If the cap leads to widespread denials or sharply reduced credit lines for subprime and near-prime borrowers, some households (allegedly 80%) could lose access to liquidity they rely on to smooth income shocks — which could raise default and bankruptcy risks for that group.
5) Interacting Forces likely to increase financial stress
A coherent narrative arises when these facts are layered together:
- Households face higher expenses than before (inflation), more expensive or scarce credit (from the risk of a cap-driven pullback), and in many cases elevated debt loads already moving some into bankruptcy (rising filings).
- Businesses face higher costs tariffs, and softer demand from consumers in price-sensitive categories, because of household belt-tightening and possibly because of the credit card cap — all of which help explain the rise in corporate filings.
Bottom line: There is a measurable increase in financial stress across households and businesses. Persistent inflation, affected by tariffs, and the possible loss of safe, affordable credit for a wide swath of society would likely worsen insolvency risks, at least for marginal borrowers and those with thin margins.
At Dalton & Tomich, we represent banks, credit unions, and other financial institutions, along with small businesses and nonprofits. Contact us today to discuss solutions to your workouts or other problems from financial stress.
