Credit Card Delinquencies Are High—What Does That Mean for Consumer Bankruptcy Filings?
For consumer bankruptcy attorneys trying to figure out where filings are headed, a recent post from economists at the Federal Reserve Bank of New York provides both some reassurance and a reason to expect that our caseloads will continue increasing.
The headline numbers certainly look bad.
Between the third quarter of 2022 and the first quarter of 2026, the percentage of credit-card balances reported as 90 or more days delinquent increased from 7.6% to 12.8%. That is enough to generate comparisons to the Great Recession and understandable concern that American consumers are rapidly losing their ability to keep up with their debts.
But the New York Fed economists argue that this statistic does not quite mean what it initially appears to mean.
And for consumer bankruptcy attorneys, the distinction may help us think about not only how distressed consumers are today, but when that distress is likely to turn into bankruptcy filings.
Stock Versus Flow: An Important Distinction
The key is the difference between the stock of delinquent debt and the flow of new delinquencies.
The stock delinquency rate measures the percentage of outstanding credit-card balances appearing on consumer credit reports that are already 90 or more days delinquent.
The flow delinquency rate instead measures accounts that newly become 90 or more days delinquent.
Those measures have recently been telling rather different stories.
As the chart on page 2 dramatically illustrates, the stock of 90+ day delinquent debt has continued climbing since roughly 2023. But the rate at which consumers are newly falling 90+ days behind has leveled off. That flow measure also tracks much more closely with the Federal Reserve Board's separate measure of delinquent balances reported by lenders.
Why the difference?
Charged-Off Debt Doesn't Necessarily Disappear
The answer lies largely in what happens after credit-card debt gets seriously delinquent.
For purposes of a lender's books, an account is typically charged off when it reaches approximately 120 to 180 days past due. Once that happens, the balance disappears from the lender's delinquency calculation.
But, of course, charge-off does not mean forgiveness.
The consumer generally still owes the debt. The creditor—or, eventually, a debt buyer—may continue trying to collect it, and the account may continue appearing on the consumer's credit report.
Accordingly, that charged-off balance can remain part of the New York Fed's stock measure of delinquent consumer debt long after it disappears from the lender's own delinquency statistics.
The researchers identify three forces determining the stock of delinquent debt: new accounts becoming delinquent, delinquent accounts curing, and the length of time older charged-off accounts remain in the data. New delinquencies accelerated following the pandemic, causing both stock and flow delinquency measures to increase. But after new delinquencies stabilized in early 2024, the stock measure kept increasing largely because charged-off debts continued accumulating.
Creditors Are Reporting Charged-Off Accounts Much Longer
Perhaps the most interesting statistic in the entire article concerns how long creditors continue reporting charged-off debts.
Between 2004 and 2012, only about 40% of borrowers' charged-off debts were still being reported one year later.
By 2024, that figure had doubled to 80%.
The authors consider whether this might reflect creditors having greater difficulty collecting these debts. But CFPB recovery-rate data have changed only slightly, making that explanation less convincing. Another possibility is simply that creditor reporting practices have changed.
That has a significant statistical consequence: yesterday's delinquency remains visible in today's numbers.
When the researchers remove these severely derogatory, charged-off accounts from the stock delinquency calculation, the apparent divergence largely disappears. The adjusted stock measure falls back into line with both the flow delinquency rate and the Federal Reserve Board's lender-reported measure.
The chart on page 4 makes this especially clear. Once severely derogatory balances are excluded, all three measures show essentially the same broad pattern: a sharp post-pandemic increase followed by relative stability since approximately 2024.
But What Does This Mean for Bankruptcy Filings?
This is where the New York Fed's findings become particularly interesting for consumer bankruptcy attorneys.
The researchers are asking whether consumers are becoming delinquent at an accelerating rate.
Bankruptcy attorneys are asking a somewhat different question:
How many financially distressed consumers are approaching the point where bankruptcy becomes necessary?
Those questions overlap, but they are not identical.
Bankruptcy ordinarily does not immediately follow the first missed credit-card payment. There can be a substantial lag between financial distress and a bankruptcy filing.
A consumer first falls behind. The creditor closes the account. The debt gets charged off. Collection calls and letters follow. The account may be transferred or sold to a debt buyer. Eventually there may be a collection lawsuit, followed by a judgment, garnishment where permitted, attachment of a bank account, or a judgment lien.
Only somewhere along that path does the consumer finally call a bankruptcy attorney.
Consequently, today's bankruptcy filings may reflect financial distress that began months or even years earlier.
And viewed from that perspective, the New York Fed's enormous accumulated stock of charged-off debt may be at least as relevant to future bankruptcy filings as the flow of newly delinquent accounts.
Bankruptcy Filings Are Already Moving Up
That interpretation is consistent with what is already happening in the bankruptcy courts.
According to the Administrative Office of the U.S. Courts, non-business bankruptcy filings increased 12% during the twelve months ending June 30, 2026, reaching 581,570 cases, compared with 519,486 during the previous twelve-month period. (United States Courts)
The chapter breakdown is even more interesting.
During the year ending June 30, 2026, there were 382,161 Chapter 7 filings, compared with 333,321 during the prior twelve months—an increase of roughly 14.7%. Chapter 13 filings increased from 200,290 to 215,490, or about 7.6%. (United States Courts)
And the most recent monthly numbers suggest that trend has not stopped. In July 2026, individual bankruptcy filings were 11% higher than in July 2025. Individual Chapter 7 filings were up 12%, while individual Chapter 13 filings were up 10%. (Epiq Global)
So the question is no longer whether consumer bankruptcy filings have begun increasing.
They clearly have.
The more interesting question is how much further they have to go.
My Prediction: Continued Growth, But Probably Not an Immediate Explosion
The New York Fed data make me skeptical of predictions of an imminent bankruptcy "tsunami."
If the flow of consumers newly becoming seriously delinquent has been largely stable since 2024, there is not presently evidence in this particular dataset of an exponentially expanding population of newly distressed credit-card borrowers. The authors themselves conclude that the pace of credit-card delinquency is elevated but has been largely stable since 2024.
But "no tsunami" does not mean "no continuing increase."
In fact, I think the data support a reasonable prediction that consumer bankruptcy filings will continue rising for at least the near term, even if new credit-card delinquency rates remain relatively flat.
There are several reasons.
First, there is already a substantial pipeline of seriously distressed consumers.
The New York Fed reports that more than 23 million Americans still have charged-off credit-card balances on their credit reports.
Not all—or even most—of those consumers will file bankruptcy. The study provides no basis for estimating what percentage ultimately will.
But 23 million people is an enormous reservoir of unresolved consumer debt.
Second, bankruptcy filings are a lagging indicator of financial distress.
If the surge in new delinquencies occurred between 2022 and early 2024, many of those accounts have only more recently moved through charge-off, placement with collection agencies, sale to debt buyers, litigation, and judgment enforcement.
For bankruptcy attorneys, that means the stabilization of new delinquencies in 2024 does not necessarily imply stabilization of bankruptcy filings in 2026.
We may instead still be working our way through the consequences of the earlier increase.
The Collection Lawsuit May Be the Transmission Mechanism
There is another reason consumer bankruptcy attorneys should pay attention to the accumulation of old charged-off debt.
Old debt eventually becomes collection activity.
An unpaid credit-card balance sitting on a credit report is unpleasant. A summons and complaint is considerably more motivating.
For many consumers, bankruptcy is not triggered by the original financial problem. It is triggered by the creditor finally doing something about it.
That may be a collection lawsuit.
It may be a judgment.
It may be a bank account attachment.
It may be a judgment lien interfering with a refinance or sale.
Or it may simply be the realization that several different creditors have now reached the litigation stage at the same time.
For bankruptcy attorneys, therefore, one useful leading indicator may not merely be delinquency rates. It may be collection litigation arising from the enormous inventory of previously charged-off accounts.
If debt buyers and collection firms increasingly work through that backlog, the result could be continued upward pressure on bankruptcy filings even without any corresponding increase in new delinquencies.
Chapter 7 May Continue Growing Faster Than Chapter 13
The recent filing numbers also raise another possibility.
Chapter 7 filings are presently growing faster than Chapter 13 filings. For the twelve months ending June 30, 2026, Chapter 7 filings increased about 14.7%, compared with approximately 7.6% for Chapter 13. (United States Courts)
That may make sense if a significant portion of the current increase is being driven by accumulated unsecured consumer debt.
Credit-card charge-offs, medical debts, personal loans, and collection judgments are classic Chapter 7 problems.
Chapter 13, by contrast, is more frequently driven by the need to save a house from foreclosure, cure mortgage arrears, protect a vehicle, address tax debts, or deal with other problems requiring reorganization rather than simply discharge unsecured debt.
So if the New York Fed's "stale delinquency" population increasingly seeks bankruptcy relief, Chapter 7 could continue to account for a disproportionate share of the growth in consumer filings.
That is a prediction rather than a conclusion of the New York Fed study, but the existing filing statistics are at least consistent with it.
Don't Confuse Stable With Healthy
There is also an important word in the New York Fed's conclusion that should not get lost:
Elevated.
The researchers do not conclude that credit-card delinquency is low. They conclude that the pace at which consumers are becoming seriously delinquent has been largely stable since 2024.
Those are very different propositions.
If a hospital emergency room consistently receives an unusually large number of patients every night, the fact that the number has stopped increasing does not mean everyone suddenly became healthy.
Similarly, stabilization in credit-card delinquency may tell us that consumer finances are no longer deteriorating at the same pace. It does not tell us that household finances are strong.
And the enormous accumulated stock of charged-off debt provides its own evidence of financial distress.
What Consumer Bankruptcy Attorneys Should Be Watching
For consumer bankruptcy practitioners, I would therefore watch several indicators over the coming year rather than focusing solely on headline delinquency rates.
The first is obviously monthly Chapter 7 and Chapter 13 filings. But equally important will be collection lawsuit volumes, debt-buyer activity, foreclosure starts, vehicle repossessions, unemployment, and whether the flow of new credit-card delinquencies finally begins moving either upward or downward.
If new delinquencies remain stable while bankruptcy filings continue increasing, that would support the theory that bankruptcy courts are still absorbing the delayed consequences of the 2022-2024 deterioration in household finances.
If new delinquencies begin rising again while that existing backlog remains unresolved, the outlook would be considerably more concerning.
Conversely, if delinquency flows begin declining, collection activity moderates, and bankruptcy growth slows, that would suggest consumers are finally working through the post-pandemic debt overhang.
For now, though, the filing statistics are unmistakably moving upward. Consumer bankruptcy filings increased 12% in the latest twelve-month federal court statistics, and individual filings were still running 11% above the prior year in July. (United States Courts)
The Bottom Line for Consumer Bankruptcy Attorneys
The New York Fed study is good evidence against treating the rising 90+ day credit-card delinquency rate as proof that consumer finances are presently deteriorating at Great Recession speed.
But it is not particularly good evidence that consumer bankruptcy filings are about to level off.
If anything, the study may help explain why bankruptcy filings can continue climbing even while the rate of new delinquencies stabilizes.
There is a long pipeline between:
missed payment → serious delinquency → charge-off → collection → lawsuit → judgment → bankruptcy.
The New York Fed is telling us that the front end of that pipeline is no longer accelerating.
But it is also telling us that there are more than 23 million Americans carrying charged-off credit-card debt somewhere farther down that pipeline.
Meanwhile, consumer bankruptcy filings are already increasing at double-digit rates. (United States Courts)
My expectation, therefore, would be continued meaningful growth in consumer bankruptcy filings through the remainder of 2026 and likely into 2027, absent a substantial improvement in household finances. I would particularly expect Chapter 7 filings to remain strong as old credit-card and other unsecured debts move from passive charge-offs into active collection.
That does not mean we should expect anything approaching the nearly 1.6 million annual bankruptcy filings seen around 2010. Indeed, despite several consecutive years of increases, total filings remain dramatically below those historical levels. (United States Courts)
But for consumer bankruptcy attorneys who spent much of the post-pandemic period wondering when filings would return, the answer increasingly seems to be:
They already are—and the accumulated stock of distressed consumer debt suggests there may still be quite a bit more coming.
To read a copy of the transcript, please see:
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