More Americans teetering on the edge of bankruptcy. Here’s why.

The number of Americans considering bankruptcy is on the rise, reaching levels not seen since just before the pandemic. This increase in personal bankruptcy inquiries in the first quarter of the year is a concerning sign as the economy faces challenges such as record levels of debt and inflation fueled by tariffs.

Before the pandemic, personal bankruptcy filings in the U.S. averaged about 750,000 a year. However, during the pandemic, government aid and relief helped buoy Americans, leading to a decrease in bankruptcy filings. Now, with the economy facing new challenges, LegalShield predicts a surge in bankruptcies as soon as this summer.

Reasons for the uptick in bankruptcy considerations include heavy consumer debts, years of inflation, and higher interest rates, all of which are squeezing Americans’ budgets. LegalShield reports an increase in billing disputes, debt collections, and other indicators of financial distress. Many Americans are struggling to pay bills and are seeking advice on how to navigate their financial difficulties.

The total household debt in the U.S. has reached an all-time high of $18 trillion, and the percentage of Americans falling seriously behind on their debts has also risen. Experts anticipate a quarter-over-quarter increase in personal bankruptcy filings as financial stress continues to build.

Economists warn that economic policies, such as tariffs, are likely to stoke inflation and dampen economic growth. However, the current wave of bankruptcy considerations reflects the ongoing financial stress that many Americans have been facing for years.

Bankruptcy experts recommend filing for protection sooner rather than later to shield assets from creditors. Bankruptcy can help individuals liquidate assets to pay off debt or create a repayment plan. Chapter 7 and Chapter 13 bankruptcy are common options for individuals seeking financial relief.

While bankruptcy can eliminate debt, it is not a solution to all financial problems. Experts advise filing for bankruptcy when individuals are starting to climb out of financial hardship rather than when things are still on the decline.

As Americans grapple with financial challenges, the rise in bankruptcy considerations serves as a reminder of the importance of financial planning and seeking help when needed. It’s essential to address financial difficulties proactively to prevent further financial distress.