Recent headlines have painted a concerning picture of American Main Street, suggesting a record wave of small business failures. Data from Epiq Bankruptcy Analytics indicates that bankruptcies filed under a special provision for small firms reached a new peak in 2025. However, a closer examination of the figures reveals a far less dramatic reality, one that underscores the resilience of the small business sector.
The Numbers Behind the Headline
According to the data, 2,221 small businesses filed for bankruptcy protection under subchapter V of the bankruptcy code in 2025. This was indeed an increase from the previous year. The scale of that increase, however, is crucial: it rose by just ten filings from the 2,211 recorded in 2024.
To provide further context, the average number of annual filings between 2020 and 2023 was approximately 1,379. The rise in recent years can be partly attributed to the increased awareness and utilisation of subchapter V, which was established in 2019 specifically to streamline the process for small businesses.
The most critical statistic, however, comes from the US Small Business Administration, which estimates there are over 33 million small businesses operating across the country. When viewed against this vast total, the 2,221 bankruptcies—while a nominal record—are statistically minuscule.
Why Aren't More Failing Businesses Filing for Bankruptcy?
This analysis leads to a compelling question. The period from 2019 to 2024 witnessed an unprecedented surge in new business applications, with over 21 million submissions. Given the well-known statistic that around 70% of startups fail within five years, one might expect a corresponding spike in bankruptcy filings. Yet, this has not materialised.
The primary reason is that formal bankruptcy is a relatively rare outcome for small businesses. Many owners simply choose to wind down operations quietly rather than incur the significant legal costs and complexity of a bankruptcy proceeding. Creditors and suppliers to small ventures often write off modest losses rather than pursue lengthy recovery actions. This practical, if sombre, reality keeps official bankruptcy figures artificially low.
A Broader Look at Business Sentiment
Far from a sector in crisis, indicators suggest widespread small business health and optimism. The National Federation of Independent Businesses reports that its optimism index remains above its 52-year historical average. Furthermore, a Comerica Bank survey found that 79% of small businesses anticipate revenue growth in the coming year. The US Chamber of Commerce also notes high confidence levels among its members looking ahead to 2026.
It is also worth noting that overall business bankruptcy filings, for companies of all sizes, remain significantly lower—by 25% to 50%—than the levels seen between 2009 and 2019, a trend that continued into 2025.
Conclusion: Context is Everything
While it is technically accurate to state that subchapter V small business bankruptcies reached a historic high in 2025, this fact alone is misleading without the essential context. The increase was marginal, and the total number represents a tiny fraction of the tens of millions of small enterprises in the United States. The data does not support a narrative of widespread collapse on Main Street. Instead, it highlights a dynamic economy where business creation is booming, failure is often handled informally, and a majority of owners are looking toward the future with confidence.
