In the first half of 2025, the US has recorded its highest number of corporate bankruptcies in five years. From familiar retail chains to once-powerful manufacturing companies, dozens of recognizable brands have filed for bankruptcy protection. This troubling trend is being tracked under the growing headline: US corporate bankruptcies are back, bigger and faster than expected.
According to recent data from S&P Global, more than 450 companies declared bankruptcy in 2024, and 2025 is on pace to surpass that figure. The US corporate bankruptcy crisis is not just about struggling businesses; it’s a reflection of deeper cracks in the post-pandemic economy. But why now, and why are these bankruptcies growing at such a staggering rate?
The Debt Hangover: When Cheap Money Turns Toxic
Easy money during the pandemic years helped many companies survive, but it also led to dangerous borrowing habits.
For years, US corporations enjoyed ultra-low interest rates that made borrowing money feel practically risk-free. This encouraged businesses, both big and small, to pile on debt, often to fuel expansion, buy back stock, or simply stay afloat. But once the Federal Reserve began raising interest rates in 2022 and 2023 to fight inflation, those cheap loans became expensive liabilities. Now, in 2025, companies are feeling the full weight of their debt obligations, especially as consumer spending softens and revenue slows.
Rising Interest Rates Crushed Cash Flow
Higher interest payments are eating into corporate profits. For some companies, especially those with already weak balance sheets, it’s been enough to push them over the edge. Legacy brands that were already fighting to stay relevant have found themselves unable to refinance or roll over debt, leading to sudden collapses.
Debt-Fueled Growth Has Its Limits
Some companies mistook debt for success, expanding too fast or acquiring too many assets without having the long-term cash flow to sustain them. In a low-rate environment, this strategy worked. But in today’s tighter credit market, it’s a death sentence.
Retail and Real Estate: Sectors in Serious Trouble
Not all industries are equally affected. Retail, real estate, and even tech have seen a corporate bankruptcy surge in recent months.
The retail sector has always been sensitive to consumer behavior. In 2025, inflation-fatigued consumers are cutting back, and many middle-income households are prioritizing essentials over discretionary spending. Retailers that failed to adapt to e-commerce trends or relied too heavily on physical storefronts have been among the first to fold.
Office Real Estate’s Worst Nightmare
Commercial real estate, especially office buildings, continues to struggle. Work-from-home is no longer a temporary trend but a structural shift. As leases expire and tenants leave, landlords are unable to fill buildings. Combine this with rising debt costs, and you get massive defaults in the commercial property sector.
E-commerce Isn’t a Lifeline for Everyone
Even online-first companies have suffered. Fulfillment costs have gone up, competition has become fiercer, and customer acquisition has become more expensive due to rising digital ad prices. Startups that boomed in 2020 are now burning out.
The Pandemic Echo: A Crisis Repeating Itself?
This year’s bankruptcies aren’t just high; they’ve now crossed pandemic-level bankruptcies. That’s shocking when you consider the scale of disruption in 2020.
During the height of the COVID-19 pandemic, government stimulus and Fed liquidity helped many businesses stay alive. But not all of them recovered fully. Some were merely delayed casualties, now succumbing to pressures they barely survived last time. The pandemic masked structural weaknesses in many companies, especially those in travel, hospitality, and legacy retail. Once the support dried up, those weaknesses became fatal.
A False Recovery Exposed
Many businesses looked healthy on the outside in 2021 and 2022, but only because they were propped up by stimulus funds, forbearance programs, or favorable loan terms. As those supports disappeared, their real financial state was revealed.
Zombie Companies Finally Falling
Analysts often referred to “zombie companies” as businesses that weren’t profitable but survived only due to cheap credit. In 2025, those companies are finally running out of time and money.
A Hard Reset or a New Normal?
There’s growing debate over whether this wave of bankruptcies is a cleansing reset or the start of a longer, more dangerous economic phase.
Some economists argue that this is a necessary correction. Weak companies are exiting the market, making room for stronger, more resilient ones. Others fear that we’re seeing the early stages of a broader slowdown, one where even fundamentally strong companies may fall victim to tightening financial conditions and shrinking consumer demand.
The Rise of Private Credit and Shadow Lending
As traditional banks pull back from corporate lending, non-bank lenders and private credit firms are stepping in. While they offer lifelines to some companies, they also come with higher costs and less transparency. This could lead to more surprises in the near future.
Bankruptcy as a Strategy?
Some large brands are using bankruptcy not as a last resort, but as a restructuring strategy. It allows them to shed debt, renegotiate leases, and emerge leaner. But even this option is becoming harder to execute successfully in a competitive, high-cost environment.
What Comes Next? A Few Possibilities
The wave of US corporate bankruptcies may continue to rise before it plateaus. But its future depends on a few key factors.
If inflation remains under control and the Fed begins cutting interest rates in late 2025, companies might find some breathing room. However, if the economy enters a full recession, even healthy businesses could face financial pressure. The mix of high debt, tighter lending, and a cautious consumer could keep bankruptcy levels elevated well into 2026.
Three Scenarios for the Near Future:
- Soft Landing with Fewer Bankruptcies: If the Fed successfully engineers a soft landing, credit conditions could ease, and only the weakest companies will fail.
- Recession-Driven Wave: A US recession would send even more companies into bankruptcy, potentially breaking records set in 2009.
- Sector-Specific Collapses: Even without a full recession, certain industries like commercial real estate or retail may continue to suffer disproportionately.
This Isn’t Just a Number, It’s a Signal
The rise in US corporate bankruptcies is more than a business headline. It’s a signal that the post-pandemic economy is still adjusting and not all companies will survive the shift. While it’s easy to blame interest rates or consumer behavior, the truth is that many brands failed to evolve in time. They bet on endless growth, cheap credit, and loyal customers. But economies change, and businesses must change with them.
As we move through 2025 and into 2026, one thing is clear: surviving in this new economic climate will require more than just strong branding or legacy reputation. It will take financial discipline, operational flexibility, and a deep understanding of shifting consumer expectations. The companies that figure this out will thrive. The rest may follow the growing list of brands that are now part of America’s corporate bankruptcy surge.
