By: Andrew Walker. Minnesota bankruptcy lawyer since 2011.
If you’ve been feeling the weight of financial stress lately, you’re not alone. After years of historically low numbers, personal bankruptcy filings across the United States are climbing again—and Minnesota is seeing the same trend. NPR recently did a study finding that bankruptcy in 2026 have so far been 50% higher than 2023.
According to recent data from the U.S. Courts, bankruptcy filings have been steadily increasing since hitting rock bottom during the pandemic. In Minnesota specifically, the numbers tell a similar story: more families are reaching the point where bankruptcy has become not just an option, but a necessary step toward financial stability.
This isn’t a sign that people are giving up. It’s actually the opposite—it’s a sign that more people are taking control of their financial futures and using the legal tools available to them to get a fresh start.
Let’s talk about what’s really happening, why bankruptcy filings are rising, and what this means if you’re one of the many Minnesotans wondering whether bankruptcy might be the right choice for you.
Understanding the Numbers: What the Data Shows
The nationwide trend is clear: bankruptcy filings dropped to historic lows during 2020 and 2021, but have been rising steadily since then. This follows a predictable pattern that economists and bankruptcy attorneys have seen before—when economic support programs end and financial pressures mount, people need relief.
In Minnesota, the U.S. Bankruptcy Court data shows similar patterns. While we’re not yet back to pre-pandemic filing levels, the upward trend is unmistakable. Minnesota families are filing for both Chapter 7 and Chapter 13 bankruptcy in greater numbers, seeking protection from creditors and a path forward. The Minnesota Bankruptcy court publishes unusually good statistics.
These aren’t just statistics—they represent real people: single parents trying to keep a roof over their children’s heads, homeowners fighting to save their houses from foreclosure, families drowning in medical debt from an unexpected illness, and workers whose wages are being garnished for debts they simply can’t pay.
Why Are Bankruptcy Filings Rising Now?
Several factors are converging to create the perfect storm of financial pressure for American families, and Minnesota residents are feeling it acutely:
The End of Pandemic-Era Protections
During the pandemic, federal and state governments implemented numerous programs to help people stay afloat: enhanced unemployment benefits, stimulus payments, mortgage forbearance programs, student loan payment pauses, and eviction moratoriums. These programs kept bankruptcy filings artificially low.
But now those safety nets are gone. Student loan payments have resumed. Mortgage forbearance periods have ended. The extra financial cushion that kept many families afloat has disappeared, and the debts that were temporarily manageable have become overwhelming again.
Inflation and the Rising Cost of Living
Grocery bills have soared. Gas prices, while fluctuating, remain higher than they were just a few years ago. Rent and housing costs in Minnesota—particularly in the Twin Cities metro area—have climbed dramatically. When your income stays the same but everything costs more, something has to give.
For many families, credit cards became the bridge to cover the gap between income and expenses. But credit card interest rates are now at historic highs, often exceeding 25% or even 30%. What started as a manageable balance quickly becomes an insurmountable mountain of debt.
Medical Debt Remains a Leading Factor
Despite policy changes and conversations about healthcare reform, medical debt continues to be one of the primary reasons Americans file for bankruptcy. An unexpected illness, accident, or medical emergency can result in tens or hundreds of thousands of dollars in bills—even for people with insurance.
In Minnesota, where healthcare costs mirror national trends, medical debt doesn’t discriminate. It affects people with jobs, people with insurance, and people who did everything “right” financially. When medical bills pile up alongside regular living expenses, bankruptcy often becomes the only realistic path to relief.
Job Loss and Income Disruption
While unemployment rates appear relatively healthy on paper, many Minnesotans have experienced job loss, reduced hours, or career changes that significantly impacted their income. It only takes a few months of reduced income for someone living paycheck to paycheck to fall hopelessly behind on bills.
The Credit Card Trap
As living costs have risen, many people turned to credit cards to cover basic expenses—not luxuries, but groceries, utilities, car repairs, and other necessities. With interest rates at historic highs, minimum payments barely make a dent in the principal balance. People find themselves paying hundreds of dollars a month just to stay current, while the actual debt never decreases.
What This Trend Really Means
The rising bankruptcy filing rate isn’t a sign of moral failure or irresponsible behavior. It’s actually a sign that people are making informed, responsible decisions to address problems they can’t solve on their own.
Think about it this way: bankruptcy law exists precisely for moments like these. It’s a legal tool created by Congress and enshrined in the Constitution specifically to give people a way out when debts become unmanageable. Using that tool isn’t giving up—it’s taking control.
The rising numbers also tell us that more people are learning that bankruptcy doesn’t carry the stigma it once did. It’s a practical, legal solution to a financial problem. Millions of Americans have filed for bankruptcy and gone on to rebuild their credit, buy homes, start businesses, and live financially stable lives.
Chapter 7 vs. Chapter 13: Which Type of Bankruptcy Is Right for You?
If you’re considering bankruptcy, understanding the two main types available to individuals is essential:
Chapter 7 Bankruptcy: A Fresh Start
Chapter 7 is often called “liquidation bankruptcy,” though most people who file Chapter 7 don’t actually lose any property. This type of bankruptcy wipes out most unsecured debts—credit cards, medical bills, personal loans, and past-due utility bills—usually within three to four months.
Who it helps: Chapter 7 is ideal for people whose income is at or below the Minnesota median income for their household size, or who pass the “means test” showing they don’t have enough disposable income to repay debts. It’s perfect for someone like Laura—a single parent overwhelmed by credit card and medical debt, who needs a clean slate to start fresh.
What it does: Chapter 7 discharges (eliminates) most unsecured debts. You keep your exempt property (like your home equity up to Minnesota’s exemption limits, your car, household items, and retirement accounts). Most people keep everything they own.
What it doesn’t do: Chapter 7 typically won’t eliminate student loans (though there are limited exceptions), recent taxes, child support, or alimony. It also won’t save a home from foreclosure if you’re behind on payments, unless you can catch up quickly.
Chapter 13 Bankruptcy: Reorganization and Protection
Chapter 13 creates a three-to-five-year repayment plan where you pay back a portion of your debts based on what you can actually afford. It’s particularly powerful for homeowners facing foreclosure or people with secured debts they want to keep.
Who it helps: Chapter 13 works well for people with regular income who are behind on their mortgage or car payments and need time to catch up. It’s designed for someone like James—a homeowner who fell behind on his mortgage and wants to save his house while reorganizing his finances.
What it does: Chapter 13 stops foreclosure and gives you up to five years to catch up on missed mortgage payments while keeping your home. It can eliminate second mortgages in some cases (called “lien stripping”), reduce car loan balances to the vehicle’s actual value, and consolidate other debts into one manageable monthly payment.
What it requires: You need to have regular income and be able to make monthly plan payments. The court will approve a payment plan based on your actual income and necessary expenses—not what creditors want, but what you can realistically afford.
Real Benefits of Filing Bankruptcy
Understanding what bankruptcy can actually do for you makes the decision clearer:
The Automatic Stay: Immediate Protection
The moment you file bankruptcy, an “automatic stay” goes into effect. This is a federal court order that immediately stops:
- Collection calls and letters
- Wage garnishments
- Bank account levies
- Lawsuits and judgments
- Foreclosure proceedings (at least temporarily)
- Repossessions
- Utility shut-offs
This protection gives you breathing room—often the first moment of peace you’ve had in months or years.
Debt Discharge: A True Fresh Start
In Chapter 7, most unsecured debts are completely eliminated. You no longer owe them, period. In Chapter 13, you pay what you can afford over three to five years, and then remaining qualifying debts are discharged.
This means you can redirect money that was going to hopeless debt payments toward building savings, covering current living expenses, and planning for your future.
Protecting Your Home and Property
Minnesota’s bankruptcy exemptions are designed to protect the property you need to live and work. Most people who file bankruptcy keep their homes, cars, household goods, retirement accounts, and other essential property.
Chapter 13 is particularly powerful for homeowners. If you’re facing foreclosure, Chapter 13 can stop it and give you up to five years to catch up on missed payments while keeping your home protected.
Stopping Wage Garnishment
If your wages are being garnished, bankruptcy stops it immediately. In Chapter 7, the garnishment ends and the debt is typically discharged. In Chapter 13, you’ll pay what you can afford through your plan instead of having wages garnished.
Peace of Mind
Perhaps the most underrated benefit of bankruptcy is psychological: the constant anxiety, shame, and fear that comes with overwhelming debt ends. You can answer your phone again. You can sleep at night. You can make plans for the future instead of just surviving day to day.
Common Myths About Bankruptcy (and the Truth)
Let’s clear up some misconceptions that keep people from getting the help they need:
Myth: “Bankruptcy ruins your credit forever.”
Truth: Bankruptcy does appear on your credit report (Chapter 7 for 10 years, Chapter 13 for 7 years), but most people who file already have damaged credit from missed payments and collections. Many people can qualify for a car loan within a year of filing and a mortgage within two to three years. Bankruptcy often improves your financial situation faster than struggling with unpayable debts for years. Most Walker and Walker clients have a 720 credit score after 2 years, and we keep a list of car loans, credit cards, and mortgage companies that will approve you right away so that you can rebuild fast.
Myth: “I’ll lose everything I own.”
Truth: Minnesota’s bankruptcy exemptions protect your home equity (up to certain limits), vehicle equity, household goods, retirement accounts, and other essential property. Most Chapter 7 filers keep everything they own.
Myth: “Everyone will know I filed bankruptcy.”
Truth: While bankruptcy is public record, it’s not published in newspapers or broadcast. Unless someone specifically searches court records, they won’t know.
Myth: “Filing bankruptcy means I failed.”
Truth: Bankruptcy is a legal right, not a moral failing. Circumstances like medical emergencies, job loss, divorce, and economic downturns affect responsible people every day. Using the legal tools available to address these problems is smart, not shameful.
Myth: “I make too much money to file bankruptcy.”
Truth: While there are income limits for Chapter 7 (the “means test”), many people with above-median income still qualify, especially with legitimate expenses. And Chapter 13 is available regardless of income level.
Is Bankruptcy Right for You?
Bankruptcy isn’t the right solution for everyone, but it might be right for you if:
- You’re using credit cards to pay for basic necessities
- You’re being threatened with foreclosure, repossession, or wage garnishment
- You’re paying minimums on credit cards but the balances never decrease
- Collection calls and letters are constant
- You lie awake at night worrying about money
- You’re avoiding answering your phone
- You’ve stopped opening your mail
- You feel hopeless about your financial future
If you’re experiencing several of these situations, it’s time to at least explore whether bankruptcy could help.
What Happens Next: The Process
Filing bankruptcy is more straightforward than most people think:
- Free consultation: Meet with a bankruptcy attorney (like Walker & Walker) to review your situation, discuss your options, and determine which type of bankruptcy makes sense—or whether bankruptcy is even necessary.
- Gather information: Your attorney will help you collect documentation about your income, expenses, assets, and debts.
- Credit counseling: You’ll complete a required credit counseling course (available online, usually takes about an hour).
- File your case: Your attorney prepares and files your bankruptcy petition with the U.S. Bankruptcy Court. The automatic stay takes effect immediately.
- Meeting of creditors: About a month after filing, you’ll attend a short meeting (called a “341 meeting”) where a bankruptcy trustee asks basic questions about your case. This typically takes 10 minutes and happens at the courthouse or virtually.
- Discharge: In Chapter 7, you typically receive your discharge (debt elimination) about 60-90 days after the 341 meeting. In Chapter 13, you complete your payment plan (3-5 years) and then receive your discharge.
Throughout the process, your attorney handles the legal work, communicates with creditors, and protects your interests.
Why Experience Matters
The rising bankruptcy filing rates mean that more law firms are offering bankruptcy services. But bankruptcy law is complex, and experience matters—especially when you’re dealing with the Minnesota bankruptcy courts and Minnesota-specific exemptions and rules.
Walker & Walker has spent 40+ years exclusively practicing bankruptcy law. We’ve helped thousands of Minnesota families navigate Chapter 7 and Chapter 13 bankruptcy, stop foreclosures, eliminate wage garnishments, and get fresh starts. We know the local bankruptcy trustees, the Minnesota exemptions, and how to handle unique situations that arise.
We also understand that you’re coming to us during one of the most stressful times of your life. Our approach is straightforward: we explain your options in plain language, answer your questions honestly, and guide you through each step of the process. No judgment, no pressure, no legal jargon you can’t understand.
Taking the Next Step
If the rising bankruptcy numbers tell us anything, it’s that you’re not alone in struggling financially right now. Thousands of Minnesotans are in the same position, facing the same difficult decisions.
The question isn’t whether you “should” be in this situation—financial struggles can happen to anyone. The question is what you’re going to do about it now.
Bankruptcy offers a real path forward. It’s not a sign of giving up; it’s taking control of your financial life and using the legal tools Congress created specifically for situations like yours.
You don’t have to figure this out alone. Walker & Walker offers free consultations where we’ll review your specific situation, answer your questions honestly, and help you understand all your options—including whether bankruptcy is even necessary.
If you’re tired of the stress, the collection calls, the sleepless nights, and the feeling of being trapped by debt, let’s talk. You might be closer to a fresh start than you think.
Contact Walker & Walker today for a free, confidential consultation. Call us or visit our website to schedule your appointment. Let’s explore whether bankruptcy can help you get your life back.
The bankruptcy filing numbers are rising because more people are making the smart, responsible choice to take control of their financial futures. Maybe it’s your turn to join them.
