Texas Has the 12th Worst Default Risk in the U.S.

Texas sells independence. No income tax, no apologies, no safety net you didn't build yourself. The brand is self-sufficiency. Come here, work hard, keep what you earn, and the government will stay out of your way.

That pitch has been working. Texas added more people than any other state over the past decade, and the economy hums along on oil, tech, healthcare, and construction. But self-sufficiency requires a margin for error. A cushion between the paycheck and the thing that goes wrong. And the data suggests that cushion, for a growing share of Texas households, has disappeared. The state scores 56.7 on the American Default Index. Elevated. Rank 13 of 51. Not the worst in the country, but worse than the state's booming-economy reputation would ever let on.

One in five Texans has debt in collections. That's 21.2%, nearly a percentage point above the national rate, spread across 254 counties and 30 million people. Credit card delinquency sits at 14.2%. It was 9.2% in 2019. Five percentage points in five years, in a state where the unemployment rate is 4.3% and the jobs never stopped coming. People are working. They're just not keeping up.

The gap between Texas's economic narrative and Texas's household data is the most interesting thing about the state's profile. GDP growth is strong. Corporate relocations make national news. The unemployment rate is below the national average. By every macro-level measure, Texas is doing fine. But zoom in to the household level and the picture fractures.

Credit card delinquency at 14.2% is nearly two full points above the national rate of 12.4%. Auto loan delinquency runs 5.8%, compared to 5.2% nationally. Mortgage delinquency is 1.21%, compared to 0.94%. Total debt per capita sits at $60,020. These aren't crisis numbers in isolation. They're erosion numbers. The kind that show up when incomes are rising but costs are rising faster, and the gap gets covered with plastic. The average Texan carries $4,620 in credit card balances. Then the rate resets, the minimum payment climbs, and the delinquency clock starts.

Here's the mechanism. Texas has no income tax, which means the state funds itself through property taxes and sales taxes. Property taxes in Texas are among the highest in the country. A household that moved from California for the "lower cost of living" discovers that the mortgage payment is smaller but the tax bill is larger, the homeowners insurance is climbing (Texas is second only to Florida for weather-related insurance pressure), and the services that other states fund through progressive taxation simply don't exist. The cost didn't disappear. It moved.

Texas is above the national average on every major delinquency metric. The numbers below show what that looks like across categories, and how far the gap has widened since 2019.

The bankruptcy numbers are the ones that made me pause. Texas saw 38,066 filings in the latest twelve-month period. That's a 26.1% increase year-over-year. The national increase was 11.5%. Texas is accelerating into bankruptcy court at more than double the national pace.

I think the Chapter 7 and Chapter 13 split tells you something about what's happening. In Texas, 58.7% of filings are Chapter 7. That's the liquidation bankruptcy. You surrender non-exempt assets, the court discharges your debts, and you start over. Chapter 13 accounts for 35.6%. That's the repayment plan. You keep your house, hand over your disposable income for three to five years, and work your way out under court supervision. The Chapter 13 share is higher than the national average, which means a meaningful chunk of filers are choosing the harder, longer path specifically to protect their home. That decision makes more sense once you understand the homestead exemption.

The filing rate of 124.8 per 100,000 residents ranks Texas only 29th nationally, which might suggest the problem is moderate. But that ranking obscures the velocity. A 26% year-over-year increase is not moderate. It's a system under accelerating stress, and the current rate is likely the floor, not the ceiling.

Texas is a non-judicial foreclosure state. The lender doesn't have to go through the courts. A foreclosure can move from default to sale without a judge ever reviewing the file. This makes the process faster and cheaper for the lender. It also means there's no accidental judicial safety net. No court backlog buying the homeowner an extra six months to figure things out. In states with judicial foreclosure, the slowness of the courts functions as an informal protection. Texas doesn't have that.

What Texas does have is one of the most generous homestead exemptions in the country. Unlimited dollar amount. The only constraint is acreage. Ten acres in a city, 200 acres for a rural family, 100 acres for a rural single adult. A $10 million home in Highland Park gets the same creditor protection as a $100,000 home in Lubbock. This means that in bankruptcy, the house is almost always safe. Creditors can't touch it. Which helps explain why 35.6% of Texas filers choose Chapter 13. The exemption makes the house worth protecting, and Chapter 13 is the tool that protects it.

But the exemption also reveals the structural contradiction at the heart of the Texas model. The state's legal architecture says: your home is untouchable. The state's economic architecture says: everything else is your problem. Texas has no anti-deficiency protection on non-homestead properties. Medical debt, credit card debt, auto loans. All of it is exposed. The homestead exemption is a fortress with no walls around it. You're safe inside the house. Step outside, and the collections rate is 21.2%.

Texas scores 30.9 out of 100 on the American Default Safety Net Index. That's Weak. Rank 46 of 51. Only five states score lower.

Texas has not expanded Medicaid under the Affordable Care Act. Enrollment sits at 14.6%. SNAP covers 10.9% of the population, about 3.37 million people. The Homeowner Assistance Fund status is unclear. For a state with 188 counties scoring Elevated or worse, the distance between the severity of distress and the capacity of the safety net is among the widest in the country.

For context, consider the peer states. Georgia ranks 11th for distress and has not expanded Medicaid either, but scores 36.7 on safety net strength. South Carolina ranks 7th and scores 40.4. Louisiana ranks 3rd but has expanded Medicaid and scores 55.1. Texas is an outlier not because of any single policy gap but because the gaps stack. No Medicaid expansion, high property taxes substituting for income taxes, non-judicial foreclosure with no court-imposed delay, and a safety net score that ranks in the bottom ten nationally. The independence model assumes people won't need help. The data says they do.

The county map

This is where the state average stops being useful. The mean county distress score across Texas's 254 counties is 57.5. But that average puts Starr County and Borden County in the same sentence, and they exist in different economic universes.

Starr County, on the Mexican border in the Rio Grande Valley, scores 79.2. Serious. The 9th most distressed county in the entire country out of 3,144. Its dominant driver is income and poverty. The top three most distressed counties in Texas. Starr, Jim Wells, Dimmit. All driven by income and poverty. All in South Texas. All along or near the border, in communities where the Texas boom has never arrived and probably never will.

Borden County, a ranching community northwest of Snyder with fewer than 700 people, scores 27.8. Healthy. The gap between the most and least distressed county is 51.3 points. That's two Texases separated not by hours of driving but by generations of investment, infrastructure, and access. The 110 Elevated counties and 78 Serious counties aren't clustered in one corner of the map. They're spread across the Rio Grande Valley, East Texas, the Panhandle, and parts of the Gulf Coast. The distress is structural, not regional. What the state average hides is that 188 of 254 counties. 74% of them. are scoring Elevated or worse in a state that calls itself an economic miracle.

CFPB complaints

Texas ranks 29th nationally for mortgage-related CFPB complaint density, with 89.3 complaints per 100,000 residents. The 27,249 total complaints since 2012 are dominated by trouble during the payment process (8,069 complaints), followed by loan servicing and escrow issues (4,549), and loan modification and foreclosure disputes (4,518). The pattern is consistent with a non-judicial foreclosure state where borrowers have fewer procedural touchpoints with the courts and more friction with their servicers. Companies responded to the vast majority of complaints within the required timeframe. Whether "responded to" means the problem was fixed is a different question. (It usually isn't.)

What the State Distress Index is measuring

The score of 56.5 is built from 6 data dimensions, weighted by how much each contributes to the overall distress picture.