• Bankruptcy-related inquiries surge 17% in Q3, signaling families exhausting options as debt compounds beyond mortgage payments
• Consumer Stress Legal Index sees highest level since March 2020 – legal stress steadily climbing going on seventh consecutive month; alarming trend headed into the holiday season
• “If the pattern holds, we're likely to see a significant spike in actual bankruptcy filings in the first quarter of next year,” predicts LegalShield’s senior data analyst

Consumer legal stress hit its highest level in nearly five and a half years, driven by a 17% surge in bankruptcy inquiries to LegalShield’s network of provider lawyers during the third quarter.

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Consumer Stress Legal Index reaches 71.2, marking its highest level since March 2020 amid seven consecutive months of increases through 2025

The LegalShield Consumer Stress Legal Index (CSLI) rose to 71.2 in September from 68.2 in June, up 26.3% from its December 2021 post-COVID low of 56.4. The index has climbed steadily for seven consecutive months.

Matt Layton, LegalShield senior vice president of consumer analytics, who analyzes consumer legal trends across more than 36 million calls dating to 2002, said the timing of the surge is particularly concerning.

"We're seeing families hit crisis mode heading into the holiday season,” said Layton. “The question now is whether this consumer legal stress translates into a pullback in spending in the final quarter of 2025."

LegalShield's data comes from more than 150,000 monthly calls to provider law firms across the country — real actions people take when facing financial and legal challenges, not surveys measuring sentiment. The CSLI is a composite index built from three subindices: Bankruptcy, Foreclosure and Consumer Finance, derived from more than 36 million records dating to 2002.

Debt Outpaces Relief: Bankruptcy Calls Jump 17% in Q3

Bankruptcy-related inquiries jumped 17% in the third quarter and 14% year over year.

Christopher Peoples, a LegalShield provider attorney in Kansas with Riling, Burkhead, & Nitcher, who counsels dozens of families in financial distress each month, said the debt is no longer confined to mortgages.

“We’re seeing a spike in bankruptcy-related calls here in Kansas,” said Peoples. “I’ve talked to my legal colleagues in other states like Utah and Idaho and they’re saying the same thing. People are drowning in this economic state we’re in – so much to pay for with prices constantly increasing and credit cards with exorbitant interest rates, everyday Americans are running out of options. Bankruptcy is their last lifeline.”

According to the Federal Reserve, 4.4% of outstanding debt went delinquent as of June—up 0.1 percentage point from the first quarter. The increase came primarily from delinquent mortgages, home equity lines of credit (HELOCs), and student loans, signaling growing financial pressure on American households.

This trend is reflected in LegalShield's Q2 Foreclosure Index, which jumped 13.0% quarter-over-quarter and 28.9% year-over-year. Property data firm ATTOM reported that foreclosure filings rose 11% in July compared to the previous month and 13% compared to July of the prior year. August filings remained elevated, down just 1.1% from July but up 18.1% year-over-year, indicating sustained financial stress among homeowners.

Given that LegalShield's bankruptcy data historically leads actual filings by two quarters, Layton predicts a difficult start to 2026.

"If the pattern holds, we're likely to see a significant spike in actual bankruptcy filings in the first quarter of next year,” said Layton.

Broader Economic Pressures on Households

The surge in bankruptcy-related inquiries reflects broader economic challenges squeezing American families. Job losses, rising prices, and high borrowing costs are creating a perfect storm of financial pressure.

Jobs: U.S. companies eliminated 32,000 jobs in September, according to ADP—adding to household financial anxiety as families face reduced income.

Inflation: Prices continue climbing, with inflation reaching 2.9% in August. As everyday costs rise, families are increasingly turning to buy-now-pay-later loans just to cover groceries and essentials. A recent LegalShield survey found that half of these consumers are missing payments on these loans.

Interest Rates: While the Federal Reserve cut rates in September for the first time since December 2024, borrowing costs remain significantly higher than before the pandemic. This means families already struggling with debt are getting little relief, even as they take on more credit to make ends meet.

KEY RESEARCH FINDINGS

Consumer Stress Legal Index (CSLI): Highest Since March 2020

• Current Level: 71.2
• Q2 2025: 68.2 | Q3 2024: 68.0
• Growth: +4.4% QoQ | +4.7% YoY
• 2025 Trend: Up 8.2% year-to-date with seven consecutive months of increases

Bankruptcy Index: Soars 17% in Q3

• Current Level: 37.7
• Q2 2025: 32.1 | Q3 2024: 33.1
• Growth: +17.4% QoQ | +13.9% YoY
• Key Insight: Bankruptcy inquiries continue upward trend since December 2021. LegalShield's Bankruptcy Index historically leads actual bankruptcy filings by two quarters.

Foreclosure Index: Decline Masks September Spike

• Current Level: 45.8
• Q2 2025: 46.8 | Q3 2024: 42.1
• Growth: -2.1% QoQ | +8.8% YoY
• Key Insight: Index eased in July and August before jumping 4 points in September to 45.8. The Foreclosure Index closely tracks national foreclosure filing trends.

Consumer Finance Index: Steady Pressure

• Current Level: 108.3
• Q2 2025: 106.4 | Q3 2024: 108.7
• Growth: +1.8% QoQ | -0.4% YoY
• 2025 Trend: Up 9.0% year-to-date as consumers seek legal help with debt disputes and negotiations

Study Methodology

LegalShield tracks an average of 150,000 monthly calls to provider lawyers based on more than 90 areas of law. That data comprises more than 36 million consumer requests for legal services dating to 2002. The CSLI is the flagship index reporting consumer stress, based on three subindices: Bankruptcy, Consumer Finance, and Foreclosure.

About the Research: LegalShield Consumer Stress Legal Index

As part of LegalShield's mission to ensure every person has equal access to justice, the company mines its data for insights policymakers can use to make a real, positive impact in their decision making. The LegalShield Consumer Stress Legal Index comprises three subindices that reflect the demand for various legal services. LegalShield's dataset includes more than 36 million consumer requests for legal assistance since 2002, averaging approximately 150,000 calls received monthly. The CSLI uncovers the daily challenges people are facing and provides actionable intelligence to help policymakers and industry leaders bridge those gaps. Released quarterly, view past reports on the CSLI page on LegalShield.com.

About LegalShield:

For more than 50 years, LegalShield has provided everyday Americans with easy and affordable access to legal advice, counsel, protection, and representation. Serving millions, LegalShield is one of the world's largest platforms for legal, identity, and reputation management services protecting individuals and businesses across North America. Founded in 1972, LegalShield, and its privacy management product, IDShield, has provided individuals, families, businesses, and employers with tools and services needed to affordably live a just and secure life. Through technology and innovation, LegalShield is disrupting the traditional legal system and transforming how and where people receive legal guidance and services, with access to hundreds of qualified, trusted attorneys and law firms. LegalShield and IDShield are products of Pre-Paid Legal Services, Inc. To learn more about LegalShield and IDShield, visit LegalShield.com and IDShield.com.

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"If the pattern holds, we're likely to see a significant spike in actual bankruptcy filings in the first quarter of next year,” said Layton.