Written by Abraham Galvan on May 13, 2026
Overall, there has been an uptick in small businesses filing for bankruptcies, local commercial real estate and small business bankruptcy and foreclosure experts report.
There has been an increase in overall filings in court statistics year-over-year, said William Kramer, a partner at Brinkley Morgan.
“There’s an 18% increase in overall filings. Of course, that includes consumers as well as businesses, but if we look at the Chapter 11 filings, those are also up,” he said. “The court information doesn’t give you an exact breakdown, but I believe there has also been a large percentage of the increase in Subchapter V small business cases as well, particularly involving service-based businesses that include movie theaters, restaurants, and retail operations.”
There are certain advantages for a small business filing under Subchapter V that it wouldn’t have in regular Chapter 11 cases, which helps to reorganize more efficiently and effectively, Mr. Kramer explained. Created by the Small Business Reorganization Act (SBRA) of 2019, Subchapter V is a streamlined form of Chapter 11 bankruptcy to help small businesses reorganize debts more quickly and affordably.
A number of factors are driving these businesses to file, he said. One is the continued high interest rates.
“A lot of people are hoping for some relief, but interest rates remain high relative to what they were a few years ago. High inflation has been an issue, especially for small businesses, and the cost of goods as well,” Mr. Kramer continued. “For example, the restaurant business is facing high food prices, increasing wages that put a lot of strain. At the same time, the consumer is getting hit in the pocketbook by increased prices for fuel and food at the grocery store and everything else. So, that limits discretionary spending, and that has impacted, I think, all the restaurant sectors, probably casual dining the most.”
Looking at the trend line in current situations and even news as recently as today, the war is having an impact on global prices that affects everyone, including here in the US, he said.
“I don’t see interest rates going down, and it looks like fuel prices will stay elevated for some time. As a result, I expect elevated filing levels throughout the year,” Mr. Kramer explained. “For many eligible small businesses, Subchapter V can provide effective relief – helping them fix their balance sheets, improve operations, and adapt to an evolving environment.”
Shutts & Bowen partner Michelle Hendler says she tends to see the distressed situation before an eventual bankruptcy.
“It normally starts with me first, and then they file for bankruptcy. We have seen, in the past year or so, an increasing amount of distressed debt issues. Most of them do lead to a foreclosure filing,” said Ms. Hendler, who co-chairs the firm’s creditors’ rights practice group. “I would say we’re seeing it in all sorts of asset classes. I’m seeing it in multi-family, hotels, and in strip centers. The trend is diversifying, and it could be mismanagement or the costs were higher than anticipated, which leads to other issues.”
Those issues could include the cost of materials, the effect of the tariffs starting to hit as everything seems to be a lot more expensive, where smaller businesses, in particular, are feeling it the most, added James Silver, a shareholder at Nason Yeager.
“I think a lot of it is just the general economy, supply disruptions, increased prices, increased cost of financing, and increased costs of labor,” he said. “One area that I think we are seeing is a lot of restaurants filing because they just can’t make it, and they’re probably dealing with higher costs for labor and what they need to operate the restaurant, and they can no longer afford the lease. Now, whether or not that’s going to have an impact at some point on the landlords who are leasing space, we’ll have to see, because it could ultimately be a spiral or a ripple effect.”
Mr. Silver said, from his point of view, this uptick in filings will continue. In the immediate future, he said, he doesn’t see anything happening that would take all these factors and make them no longer a problem.
“I think business owners need to make their business more efficient, and competitive, so they can survive financially,” he continued, “and if they have already done all that, and there’s no more they can do to continue as is, then I think those businesses need to consult with professionals to see whether bankruptcy Chapter 11 reorganization or other legal avenues may exist to try to restructure and address these issues and be able to survive into the future.”
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