Key Findings:
- Small businesses are struggling, with bankruptcy spikes in states like Georgia (+184%) and Wyoming (+366%).
- Bankruptcies persist despite growth, as seen in New York (876) and Texas (1,366), where GDP grew by 4.7% and 4.9%, respectively.
- Stronger economies see fewer bankruptcies, with Wisconsin (-44.4%) and Oregon (-42.2%) aligning with high GDP growth of 6.5% and 5.1%.
In 2024, 8,435 U.S. businesses filed for bankruptcy — a 2.3% increase from the previous year — bringing the national bankruptcy rate to 47.2 per 100,000 businesses.
While some states are showing resilience, others are experiencing alarming surges in closures, signaling deeper economic instability.
Former fast-fashion powerhouse Forever 21 filed for bankruptcy with $1.58 billion in debt after suffering over $400 million in losses in just three years.
The retailer lost $150 million in 2024 alone and was projected to lose another $180 million in 2025, underscoring the financial pressures forcing businesses to shut down.
Looking at trends, June was the worst month, with a staggering 1,802 bankruptcy filings nationwide in 2023.
February 2024 was also a cause for concern, with bankruptcy filings nearly doubling YoY.
According to DesignRush General Manager Gianluca Ferruggia, businesses — regardless of size — simply cannot ignore all this data:
“Georgia’s numbers are particularly alarming — 605 businesses shut down in 2024, compared to just 213 the previous year. That’s a massive red flag. Even big brands like Forever 21 are closing up shop in the state, which doesn’t bode well for smaller local businesses.
Even in states where filings are relatively low, some are seeing shocking spikes. Wyoming, for instance, saw bankruptcies rise from 3 to 14. It might not sound like much, but that’s a 366% jump.
The key takeaway? Don’t wait until it’s too late. Keep a close eye on your cash flow, cut unnecessary expenses, and build a financial cushion. The economy is unpredictable, and businesses that prepare now will have a better chance of surviving whatever comes next.”
While some states face mounting challenges, others provide a safer environment for businesses to grow and thrive in 2025.
To determine this, our study analyzed business bankruptcy rates, year-over-year bankruptcy growth, and state economic performance to rank the most and least at-risk states for business bankruptcies in 2025.
View the Full Ranking.
States Most At-Risk for Business Bankruptcies
1. Georgia
- Bankruptcies: 97.9 per 100,000 businesses
- YoY Change: +184.04%
- GDP Change: +4.70%
- Final Score: 95.1
Georgia’s business failure rate is more than twice the national average, with bankruptcies rising from 213 in 2023 to 605 in 2024. The retail sector has been hit hardest, and despite GDP growth, small businesses continue to struggle under financial strain.
2. Delaware
- Bankruptcies: 1,796.3 per 100,000 businesses
- YoY Change: +37.79%
- GDP Change: +6.40%
- Final Score: 86.3
Delaware has the highest bankruptcy rate nationwide due to the state’s status as a corporate registration hub and its incorporation laws.
However, the surge from 897 to 1,236 bankruptcies in a year signals growing instability even among registered entities.
3. New Jersey
- Bankruptcies: 97.9 per 100,000 businesses
- YoY Change: -48.98%
- GDP Change: +5.10%
- Final Score: 80.9
New Jersey saw bankruptcies drop from 976 in 2023 to 498 in 2024, but its overall rate remains high. While the economy is improving, small businesses still face significant challenges, indicating an uneven recovery.
4. New York
- Bankruptcies: 87.4 per 100,000 businesses
- YoY Change: -5.81%
- GDP Change: +4.70%
- Final Score: 80.5
New York recorded 876 bankruptcies in 2024, a slight decline from the previous year. Retail, hospitality, and small businesses continue to struggle, and economic growth isn’t fast enough to counteract closures.
5. Texas
- Bankruptcies: 86.7 per 100,000 businesses
- YoY Change: -24.15%
- GDP Change: +4.90%
- Final Score: 79.1
Texas reported 1,366 bankruptcies in 2024, down from 1,801 in 2023. While the decline is notable, the state’s sheer number of businesses means even small percentages translate to large-scale closures.
States Least At-Risk for Business Bankruptcies
1. Connecticut
- Bankruptcies: 5.5 per 100,000 businesses
- YoY Change: -29.41%
- GDP Change: +5.50%
- Final Score: 53.7
Connecticut leads the way as the safest state for businesses. It saw a 29% decline in bankruptcies and strong GDP growth, contributing to a stable business environment.
This economic strength provides businesses with an environment to grow and thrive.
2. Wisconsin
- Bankruptcies: 10.5 per 100,000 businesses
- YoY Change: -44.44%
- GDP Change: +6.50%
- Final Score: 53.9
Wisconsin saw one of the most dramatic year-over-year drops in bankruptcies, cutting nearly half of its closures.
With a solid 6.5% GDP growth, the state remains economically resilient.
3. Vermont
- Bankruptcies: 2.3 per 100,000 businesses
- YoY Change: 0.00%
- GDP Change: +6.20%
- Final Score: 54.1
Vermont holds the lowest bankruptcy rate nationwide, unchanged year-over-year. This stability reflects steady economic growth and a secure business climate.
4. Oregon
- Bankruptcies: 9.8 per 100,000 businesses
- YoY Change: -42.22%
- GDP Change: +5.10%
- Final Score: 54.4
Oregon’s bankruptcy filings fell sharply in 2024, with over 40% fewer cases than the previous year. A below-average rate makes it a strong choice for businesses.
5. New Mexico
- Bankruptcies: 6.1 per 100,000 businesses
- YoY Change: -33.33%
- GDP Change: +3.50%
- Final Score: 54.5
New Mexico saw its business bankruptcy rate drop by a third, signaling better conditions for businesses. Although GDP growth was more modest, the state remains on an upward trend.
Methodology
To understand the business climate in each state, we looked at three key factors: the bankruptcy rate, the year-over-year (YoY) change in bankruptcies, and the YoY change in GDP.
1. Bankruptcy Rate
This is the number of bankruptcies per 100,000 businesses in each state. We calculated it by dividing the number of bankruptcies by the number of businesses in that state.
Sources:
- 2024 Bankruptcy Data: U.S. Courts
- Number of businesses (latest): NAICS
2. Bankruptcy YoY Change
This shows how much bankruptcies have increased or decreased from 2023 to 2024. It’s calculated by finding the percent change in the number of bankruptcies between the two years.
Source: U.S. Courts
3. GDP YoY Change
This measures the change in a state's GDP from 2023 to Q3 2024. It helps us understand the economic growth or decline in each state.
Source: Bureau of Economic Analysis
How We Calculated the Final Score
Each of these metrics was given a weight:
- Bankruptcy Rate: 60%
- Bankruptcy YoY Change: 30%
- GDP YoY Change: 10%
We then normalized the data on a scale from 50 to 100 and calculated a weighted average to come up with the final score, which reflects the overall business climate in each state.
The rising bankruptcy rates underscore a growing divide between states where businesses can thrive and those where financial pressures are forcing closures.
As such, businesses operating in high-risk states must take proactive steps to mitigate potential downturns.
Tackle business challenges with the right support. Explore the DesignRush agency directory to find experts who can help drive your growth.
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