Are mom-and-pop stores going bankrupt at historically high levels? That would seem to be the impression you’d get from recent news reports referencing data released from Epiq Bankruptcy Analytics, a provider of legal services that specializes in bankruptcy services.
Uh-oh! Some have seen this as proof that Donald Trump’s policies are bankrupting Main Street. Well, no, not quite.
It is true that, according Epiq’s data, there were 2,221 filings for bankruptcy protection under a special provision for small businesses of the bankruptcy code – subchapter V – that was created for this purpose back in 2019. And it is true that the number of filings increased last year. But by how much? Ten. No, you’re not misreading this. There were 2,211 filings in 2024, 10 fewer than 2025.
What about prior years? Between 2020 (the first year of inception of subchapter V) and 2023 there were an average of 1,379 filings, so you can make a case that, as the law became more well known, more filings were made by small businesses. However, let’s remember that there are more than 33m small businesses in the US, according to the Small Business Administration. The historically high 2,221 bankruptcies is statistically (and laughably) meaningless.
And even if you consider all the bankruptcies filed for all business sizes, the numbers are still not a cause for concern. Bankruptcy filings by the end of the Biden administration in 2024 had risen more than 25% compared with when Joe Biden took office. Covid didn’t help. And yet those filings were still 25-50% lower than the bankruptcy filings from 2009 to 2019 and remained that way in 2025. The number of US businesses going bankrupt is still at historically low levels.
But should they be this low?
It’s common knowledge that the typical lifespan of a startup is two to five years, with 70% going out of business before reaching their fifth year. The period between 2019 and 2024 saw the largest spike in new business filings in US history, with more than 21m new business applications submitted during that period. Intuit says that side-gig activity is “booming” and “33% of US adults plan to start a business or side hustle next year – a 94% year-over-year increase”. LinkedIn reports that small business creation jumped 69% as “entrepreneurs bet big on growth”.
Good for them. But where are all the busts? Given all these new companies and, given the rate of failure for such companies, shouldn’t there be more going out of business in those subsequent years? Why aren’t bankruptcy filings spiking as a result?
One big reason is that bankruptcy filings are pretty rare for small businesses and startups. I’ve worked directly with hundreds of businesses over the past two decades and have hardly ever encountered one that files for bankruptcy. That’s because when a business goes belly up, many business owners walk away rather than paying the costs of bankruptcy. And because small businesses spend smaller dollars, their suppliers generally write off their losses, lick their wounds and move on. This doesn’t happen in every case, obviously. But for the most part, people know the risks they’re incurring and don’t want to throw money at lawyers to make up for their bad decisions.
The reality is that most small businesses did pretty well in 2025 and a great majority are optimistic about the next year. The National Federation of Independent Businesses reports optimism higher than its 52-year average. Comerica Bank says that 79% of small businesses are expecting revenue growth next year. The US Chamber of Commerce reports a high level of confidence among its members heading into 2026.
Sure, mom-and-pop bankruptcies under a special section of the bankruptcy code are now at a “historic high”. However, the numbers need to be put into a better context. There are plenty of other legitimate reasons to criticize Trump. An increase in mom-and-pop bankruptcies isn’t one of them.
