How Rising Interest Rates Could Lead More People to Bankruptcy in 2025
- McMann, P.A.
- Feb 27
- 2 min read
Interest rates have been a major factor in the financial well-being of individuals and businesses, and while the economic outlook is brightening under the Trump administration, many are still feeling the effects of recent rate hikes. For those struggling with debt, high interest rates can increase the likelihood of financial distress, making bankruptcy in 2025 a viable option for relief.
At McMann, P.A., Attorney Mark McMann assists individuals in Lakeland, Tampa, Orlando, and throughout Central Florida who are facing financial hardship due to rising interest rates.
How Interest Rates Affect Debt & Bankruptcy
When the Federal Reserve raises interest rates, it impacts a wide range of financial obligations, including:
Credit Card Debt – Higher rates mean higher minimum payments, making it harder for individuals to stay ahead of debt.
Mortgage Payments – Adjustable-rate mortgages (ARMs) become more expensive, pushing homeowners closer to foreclosure.
Car Loans – Rising rates increase monthly car payments, leading to more defaults and potential repossessions.
Business Loans – Small businesses relying on financing struggle with increased borrowing costs, leading to potential closures and Chapter 11 bankruptcies.
The Growing Financial Strain on Households
While the economy is expected to improve, many individuals are still recovering from the financial strain of the past few years. Rising interest rates can accelerate financial hardship, causing:
Higher monthly debt payments that cut into essential living expenses.
Increased risk of default on loans, mortgages, and credit card balances.
More foreclosures and repossessions, leaving families without homes or vehicles.
Greater reliance on credit to cover everyday expenses, creating a debt spiral.
Will Interest Rates Push More People Toward Bankruptcy?
For those already struggling, higher interest rates could push them over the edge. Signs that someone may need to consider bankruptcy include: ✔ Minimum payments are no longer covering credit card interest. ✔ Mortgage payments are becoming unmanageable. ✔ Wage garnishments are reducing take-home pay. ✔ Collection calls and lawsuits are increasing. ✔ More debt is being used to cover basic expenses.
How Bankruptcy Can Provide Relief
If high interest rates have made debt unmanageable, bankruptcy may be a solution:
Chapter 7 Bankruptcy – Eliminates unsecured debts (credit cards, medical bills) and provides a fresh start.
Chapter 13 Bankruptcy – Allows debt restructuring and helps individuals catch up on mortgage or car payments.
Automatic Stay – Filing for bankruptcy stops foreclosures, repossessions, and creditor harassment.
Taking Action Before It’s Too Late
If rising interest rates are putting pressure on your finances, taking early action can make a difference. Consulting with a bankruptcy attorney can help you determine the best path forward before debt becomes overwhelming.
McMann, P.A. Can Help You Find Financial Relief
At McMann, P.A., we are committed to helping individuals in Florida regain financial stability. If you are struggling with debt due to rising interest rates, we can guide you through your bankruptcy options.
Mark D. McMann
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