September 8, 2026

Alabama Bankruptcies Continue to Outpace the Nation

By J. Thomas Wade
Blue RAM Media/Gulf Coast News

September 8, 2026

ALABAMA

People keep spending beyond their means and are frequently faced with the dreaded bankruptcy way out of debt.

Alabama is one of those states, where many continue to take the path of least resistance and the number of bankruptcy filings are climbing higher and higher.

According to a recent study, the state had the nation’s highest bankruptcy filing rate every year from 2020 through 2025, reaching nearly 400 filings per 100,000 residents in 2025.

And it looks like 2026, might join those numbers as well.

That’s according to data from the U.S. Courts and Census Bureau population estimates, which shows Alabama’s bankruptcy filing rate is roughly 142% higher than the national average.

While jobs are coming to the state, wages are still comparatively lower than many states but that really isn’t the cause of personal debt, said one bankruptcy attorney.
He said it’s the people who can’t control their spending and live outside of their means.
People buy things on credit today and don’t worry about it until the bills start coming in.

In fact, most states fall between 80 and 180 filings per 100,000 residents, so Alabama isn’t just at the top of bankruptcy cases, it’s in a different tier entirely.

Compared to other Southern states, Mississippi wasn’t too far off with a filing rate of 330 per 100,000 residents, followed by Tennessee, which had a rate of 296 and Georgia with 280.

The report showed that even though Alabama has had a steady climb over the past four years, 2025’s bankruptcy filings were still roughly 25% below the 2017 peak, when the rate hit 554 filings per 100,000 residents.

For the 12-month period which ended Sept. 30, 2025, the total cumulative filings for all U.S. states, territories, and the District of Columbia were 557,376.1 This represents a 10.6% increase over the prior 12-months.

Alabama showed signs of recovery from bankruptcy filing highs of the pandemic, after pandemic relief programs like stimulus payments and loan forbearance helped a lot of Alabamians stay out of bankruptcy court.

Filings fell roughly 20% from about 18,400 in 2020 to about 14,900 in 2021, with the filing rate dropping along with it, from nearly 366 to 296 filings per 100,000 residents. That figure is the lowest dip the state has seen in a decade.

But things are rapidly going back the other way economists say and it’s not just in personal debt. Businesses of all sizes have seen a steady increase in bankruptcy filings during the past three years as well.

Total bankruptcy filings in Alabama from 2020 to 2025 were:

2020: 18,412

2021: 14,940

2022: 16,561

2023: 17,887

2024: 19,395

2025: 20,636

Still 98% of bankruptcy filings every year from 2015 to 2025 have been non-business related, while total filings went up nearly 6% year-over-year.

That imbalance between personal and business bankruptcy filings means it’s not companies who are struggling, it’s individuals.

In Alabama and nationwide, Chapter 7 is the most filed version of bankruptcy protection, with Chapters 13 and 11 in second and third place, respectively.
A Chapter 7 will wipe most debt clean and give the person a low credit score while putting them in a high-risk category for any type of credit.
Chapter 13 enables individuals with regular income to develop a plan to repay all or part of their debts, thereby keeping their credit alive but still damaged.
And a Chapter 11 generally provides for reorganization, usually involving a corporation or partnership.

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