Consumer Debt Fuels Legal Stress to Post-Pandemic High

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According to the LegalShield Consumer Stress Legal Index (CSLI), consumer spending appears strong but is increasingly funded by debt rather than disposable income, with total U.S. household debt climbing above $18.59 trillion. This has driven a sharp rise in legal inquiries tied to billing disputes, collections, and creditor negotiations, as well as increases in the Bankruptcy and Foreclosure subindexes, suggesting the current wave of financial stress is driven by rising debt even in a stable job market.

Why it matters

The CSLI provides a unique window into the concrete financial pressures facing American households, going beyond sentiment surveys to track the actual legal steps people are taking to manage debt, foreclosure, and bankruptcy. This data suggests the consumer spending resilience may be masking an underlying household debt crisis that could have broader economic implications.

The details

The CSLI, built from LegalShield's nationwide network of provider law firms, showed a 4.4% rise in the fourth quarter of 2025, the third consecutive quarterly increase that pushed the index 10.4% above 2024 levels to its highest sustained point since the early pandemic. The Consumer Finance subindex grew 16.3% since January 2025, reflecting a sharp rise in legal inquiries tied to billing disputes, collections, and creditor negotiations. The Bankruptcy subindex was up 19.9% in the second half of 2025 and rose 15.6% year over year, serving as a leading indicator for a 13% year-over-year increase in non-business bankruptcy filings in U.S. courts in Q4 2025. The Foreclosure subindex was up 15.0% year-over-year, with inquiries indicating homeowners face structural pressure from elevated insurance, tax, and escrow costs, even on fixed-rate mortgages.

• The LegalShield Consumer Stress Legal Index (CSLI) rose 4.4% in the fourth quarter of 2025.
• The CSLI has seen three consecutive quarterly increases, pushing it 10.4% above 2024 levels.
• The Consumer Finance subindex grew 16.3% since January 2025.
• The Bankruptcy subindex was up 19.9% in the second half of 2025 and rose 15.6% year over year.
• Non-business bankruptcy filings in U.S. courts increased 13% year-over-year in Q4 2025.

What they’re saying

What’s next

The White House has proposed a 10% interest rate cap in response to rising credit card delinquencies, which could provide some relief for indebted households.