� � � � The new bankruptcy law, which just took effect October 17, limits “clean slate” Chapter 7 bankruptcy filings by people with enough income to settle at least a share of their debts. While Chapter 7 disposes all debts, the legislation included a means test requiring those with incomes above the state median to file Chapter 13 instead. Under Chapter 13, debtors must make as many payments as possible under a court-supervised plan in order to start over with a clean credit history. In addition, debtors must take a course in credit counseling and financial planning. To curb fraud, more extensive financial documentation is required.

� � � � On April 15, the morning after the House’s endorsement, CNBC’s Ron Insana appeared on NBC’s “Today” to discuss the legislation with Katie Couric. While Insana at least hinted that encouraging personal responsibility was a factor in the reforms, Couric claimed that this “whole notion that people are trying to get out of their debt, is that a little bit misleading?” Stating that “about half file because of mounting debt from health problems,” she used faulty statistics from a Harvard study to support her claim. A close look at that study shows that Couric’s assessment was off base.

� � � � According to Gail Heriot in a February 11 article for National Review Online, the Harvard “study does not claim that injury or illness was the primary cause of [54.5 percent of all] bankruptcies. And, perhaps more importantly, it does not claim that the bankruptcies were caused by the crush of medical bills.” Heriot pointed out that 73 percent, an overwhelming majority, had medical expenses less than $1,000, and that only 28.3 percent of the survey participants agreed with the authors of the study that “illness or injury” caused their bankruptcy. The media turned the Harvard study on its head to suggest that bankruptcy is most often a result of incontrollable bad luck.

� � � � Although Bowen gave air time to a credit card industry representative who alluded to the importance of personal responsibility and a free market that gives “everybody a shot at the golden ring,” Bowen stacked the deck against lenders and a “new law [that] will make that golden ring even more elusive.” By presenting a group of debtors long on credit card bills and short on cash, Bowen gave the impression that credit card companies and bad luck were to blame for their account holders’ spending habits.

� � � � To appraise the financial challenges of Katrina’s victims, the media have reported prolifically on everything from flood insurance to rebuilding costs on the Gulf Coast. As this week’s effective date for the bankruptcy law approached, all three broadcast networks used the storm’s victims to lobby for the delay of the reform.

� � � � A September 25 “World News Tonight” report offered consumer advice shrouded in adversity. ABC’s Gigi Stone interviewed a couple who “were forced to turn to credit cards after losing their mobile home to Florida’s Hurricane Ivan.” In the process the couple racked up $60,000 in debt and had to file for bankruptcy. Stone did not say whether the couple would have passed the new means test for Chapter 7, though it’s hard to imagine they would have failed, given their modest means.

� � � � Still, Stone signed off by saying “things could get even tougher for families like these. New laws will make it more difficult for people to file for bankruptcy. In fact, some consumer advocates are urging Congress to delay those laws for hurricane victims.” Despite offering useful consumer advice like, “don’t sign anything,” “hoard your cash,” and “use your credit cards as a last resort,” she didn’t reveal that indigent debtors will likely pass the means test for Chapter 7 and will still be able to file post-reform. In effect, the report lobbied for a delay without presenting all the facts.

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