US small-business bankruptcies rise 46% as Chapter 11 filings increase in 2026

US small-business restructuring filings increased 46% during the first nine months of 2026, highlighting mounting financial pressure on smaller companies and raising questions about the recoverability of trade receivables and secured lending exposures.

New figures from Epiq AACER show that 2,442 businesses elected to use Subchapter V of Chapter 11 between January and September, compared with 1,672 during the same period in 2025.

Subchapter V provides a streamlined restructuring process for eligible smaller businesses, allowing them to reorganise their debts rather than immediately liquidate. The increase is particularly relevant to factors, invoice financiers and asset-based lenders exposed to smaller corporate borrowers and their customers.

Broader commercial bankruptcy figures also deteriorated. Commercial Chapter 11 filings reached 6,560 during the nine-month period, an increase of 11% from 5,895 a year earlier. Total commercial filings rose 7% to 25,467.

The latest monthly figures present a more mixed picture. Commercial Chapter 11 filings fell 16% year on year in September, from 769 to 648. However, Subchapter V elections increased 38% to 276, suggesting that distress among smaller businesses remained elevated despite the decline in larger Chapter 11 filing totals.

Epiq noted that September 2025’s Chapter 11 figures included 109 related filings involving a long-term care pharmacy services provider, complicating the annual comparison.

For receivables financiers, the distinction between a financially distressed borrower and a distressed underlying debtor is important.

A factoring client entering restructuring may create servicing, documentation and recovery problems. Where the debtor responsible for paying an assigned invoice becomes insolvent, the consequences can include delayed collections, disputed payment obligations and reduced collateral availability.

Asset-based lenders may also need to reassess borrowing bases as previously eligible receivables become doubtful or subject to additional reserves.

Michael Hunter, vice-president of Epiq AACER, attributed the broader increase in bankruptcy activity to higher borrowing costs, rising expenses, growing consumer delinquencies and a softer employment market.

Legislative changes could also affect future filing patterns. Congress has passed legislation intended to restore the Subchapter V debt eligibility threshold to US$7.5m, although the measure had not yet been signed into law when the figures were released.

The data does not establish that factoring defaults are increasing at the same rate as bankruptcy filings. It does, however, underline the importance of debtor monitoring, receivables verification and collateral controls as smaller US businesses face persistent financial pressure.