Monday, November 10, 2008

The Bankruptcy Burden

We're not economists, and certainly not of the Chris Flanagan/Mark Zandi ilk, but thought we'd give it a bash for a change and share with you all some of our thoughts on the October bankruptcy filings, which were up a troubling 13% from September for the US as a whole.

(Click on the graph to enlarge)

While an increase is understandable -- if not expected -- the rate of increase (i.e., the convexity) is disturbing.

As is typical, the lion's share (+- 95%) of these are non-commercial and heavily concentrated (99%) among chapters 7 and 13 of the bankruptcy code, although the distribution differs vastly from state to state (see table below).

We know October was a tough month for fixed-income, and by extension for banks and hedge funds, but the pain here remains non-commercial (think residential homeowners with little equity in their houses, in areas exhibiting strong home price depreciation).

(Click on the table to enlarge it)

We found this to be largely consistent with's Dismal Scientist's analysis of recessionary vs. at risk states from last month (the top 5 are all in red, and the bottom 5 -- aside from Mississippi -- are all in orange, for now.)

We'll keep you posted on changes as the commercial real estate difficulties start to take their toll on corporate sustainability.

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