For some idea as to how the other half lives in the run-up to YBK (now only ten weeks away !!), here's a Dallas Morning News article on the recent increase in bankruptcy filings in North Texas. The Lone Star State would probably not be directly effected by the bursting of the housing bubble, since home prices in Texas have not increased in value that much in recent years. In fact, the value of single family residences went up only 3.77% last year, putting the state dead last in the country, and barely keeping ahead of inflation; since 1980, Texas ranks 49th, ahead of only Oklahoma.

According to statistics published by the Northern District of Texas, filings went up 11% in the quarter beginning in April, the month Bush signed the new bankruptcy law, and in the month of June alone, filings rose almost 35% from the same month last year. Because of the stagnant real estate market in that state, however, the new law will not have as dramatic an effect in Texas. Without being able to borrow on the equity in their homes when times get tough, Texas homeowners are less likely to incur high levels of secured debt, but are more directly susceptible to the threat of foreclosure.

Because of that, when it comes time to seek bankruptcy relief, Texans have been more likely to file under Chapter 13, the procedure favored under the new law, which requires debtors to make monthly payments to certain creditors (and, as I noted earlier, the procedure most amenable to fraud) over a period of time. Since 1994, nearly half of all bankruptcy petitions in Texas have been filed using that procedure, which allows the debtor to hang on to his home while discharging other debt at the same time.

Under current law, Chapter 13's are mostly used to repay delinquent mortgages and car payments, and are filed literally on the eve of a foreclosure sale; after October 17, however, the courts may force more debtors into that procedure, whether they own a home or not. Since Chapter 13's are already more prevalent in Texas, and since the impact of the housing bubble bursting will not be felt as severely in that state, the YBK effect won't have quite the same dramatic effect in the Lone Star State that it will have in, let's say, California or Florida. So any increase in bankruptcy filings will be due exclusively to the ominous threat of the new law, not to other economic trends, and the devastation to that economy will be far less.

UPDATE [8/8]: But see also, contra, Charles Kuffner, who believes that the Great Burst will impact states like Texas, albeit in a different way than the YBK impact: via an increase in inventory of unsold homes. If that happens, the impact would initially hit businesses (ie., construction, mortgaging, contracting, etc.) rather than consumers no longer able to borrow on their homes.