How Rising Interest Rates Impact Both Businesses and Consumers in Michigan

You’re probably already aware that the Fed voted unanimously in late September 2026 to raise its benchmark federal funds rate by 25 basis points. This lifted its target range from 3.5%-3.75% to 3.75%-4%.

It was the first rate hike since July of 2023. And there’s the distinct possibility of another one just around the corner before the end of the year.

So how do these rising interest rates impact businesses and consumers here in Michigan? The biggest impact will be higher borrowing costs for items and services such as credit cards, loans, mortgages, utilities, fees, and consumables, to name just a few.

The Headache of Rising Interest Rates for Businesses

An increase in Fed interest rates means that customers typically spend less because debt and other lending products like loans become more expensive. Even incremental interest rate increases on existing debt and variable lines of credit such as merchant cash advances (which are risky even when rates are steady) mean you could see higher interest charges on your next bill.

As your customers and suppliers adapt to the new rates, you can expect collections to slow. This will, of course, impact your entire working capital cycle. The cash you have readily available will be less since it could be tied up in collections and more.

Meanwhile, the price you pay for everything associated with your business can also rise. Existing supply contracts or hedging will protect you for the time being. But when they expire, it’s likely the cash spent on significant inputs to your business will also increase.

Plus, you’ll need to anticipate that the demand for your company’s products or services may be negatively impacted. This could lead you to question whether you need to increase pricing on your product and/or service.

But the headaches don’t stop there. Rising interest rates could have repercussions on your personal cash flow as well. Particularly in Michigan.

How Rising Interest Rates Impact Businesses and Consumers in Michigan Specifically

For consumers in Michigan, the Fed’s interest rate hike could be especially problematic. Whether directly or indirectly, the state’s economy is still largely centered on the auto industry. This is an industry that’s already struggling with supply chain instability, tariff disputes, shrinking margins, layoffs, and EV transition costs. With rising borrowing costs increasing, it impacts entire communities.

Unfortunately, because many Michigan workers don’t have a cushy stock portfolio, they rely on wages, overtime work, and shift work to support themselves and their families. When these disappear as businesses tighten their belts, it leaves workers vulnerable.

Where the real irony lies is in the fact that for those living outside of Detroit proper, the option to cut expenses by taking public transportation is essentially non-existent because of the automotive industry’s chokehold on the City. So, consumers are forced to keep financing vehicles so they don’t lose their jobs. It’s a slippery slope. And it’s one that often leads to having to file for bankruptcy.

How Filing for Bankruptcy Could Help

One way consumers and businesses can attempt to manage a decrease in cash flow is through the “debt snowball” strategy. You pay off debts from the smallest to the largest balances while making minimum payments on their other accounts. Yet, if the interest rate hike combined with external factors outside your control has made it impossible to manage your finances, bankruptcy could be a viable solution.

There are different kinds of bankruptcy. For businesses struggling to stay afloat, the usual route is Chapter 11. For individual consumers, however, Chapter 7 is the most common solution. Here’s how they work:

Chapter 11 Bankruptcy

Filing for a Chapter 11 bankruptcy allows you to continue operating your business while concurrently repaying creditors. With a Chapter 11, you typically have the right to file a plan of reorganization for the first 120 days after you file the case. The plan is sent to the court, which either approves or disapproves the plan of reorganization.

If the plan is approved, you can reduce your debts by repaying a portion of your obligations and discharging others. You also have the option to terminate costly contracts and leases, recover assets, and restructure your operations for profitability. There usually follows a period of consolidation after which you would emerge with a reduced debt load and a reorganized business.

Chapter 7 Bankruptcy

Meanwhile, for individual consumers, filing for a Chapter 7 bankruptcy is typically the quickest. It wipes out most unsecured debt like medical bills, utility balances, and credit card accounts to give you a fresh start. But not everyone qualifies for Chapter 7 discharge.

To determine qualification, you must pass a two-step means test. If your income is too high as a result of your family’s gross income or according to your state’s median income for the same household size, you may fail this first part of the test. That doesn’t mean you’re automatically disqualified, however. You can still deduct expenses in the second part. And if those expenses are high enough, you may pass.

Finally, if your debts are primarily non-consumer debts, you may be exempt from the means test altogether. You’ll need to consult an experienced bankruptcy attorney to determine whether your debts qualify as non-consumer debts.

Always Work With Expert Bankruptcy Attorneys You Can Trust

As rising interest rates impact businesses and consumers in Michigan, the number of bankruptcy filings is increasing.

If you’re considering this route, it’s crucial you work only with the most skilled bankruptcy lawyers. The professionals at Gold, Lange, Majoros, and Smalarz in Southfield are those attorneys.

Our team of bankruptcy attorneys has more than 130 years of combined experience. So contact us today at 248-462-7698 to schedule a free initial consultation. You can also connect with us through our website.