I’ve often wondered why people wait so long before they file bankruptcy. Like, for example, wait until the morning that their house is scheduled to be auctioned. Wait until they know the tow-truck is coming to take their car away. Then, I wondered if Pop Culture’s Financial Gurus had anything to do with it. Dave Ramsey is one of those gurus who gets a lot of face time on the tube as well as voice time on the radio. He’s also got a book or two out. He hates bankruptcy. Do people listen to him? I bet they do and if you are thinking about bankruptcy, you might want to continue reading.
On bankruptcy, Dave Ramsey says this on his website:
Bankruptcy is not something I recommend any more than I would recommend divorce. Are there times when good people see no way out and file bankruptcy? Yes, but I will still talk you out of bankruptcy if given the opportunity.
It might shock my readers to hear that I tend to be opinionated. I would have no problem recommending divorce if I thought someone should dump their spouse. Of course, I would expect to be asked for that opinion – I would not just approach some random couple on the street who were fighting and offer my unsolicited opinion. I also have the decency to talk someone out of bankruptcy if I thought it was an unwise decision. Yes, I know that means I will not earn a fee for filing a case. But since I know what it’s like to pay for the pain of what I only learned later was unnecessary dental and gum procedures, I do not believe that I should just file bankruptcy for people who I honestly believe do not need it. Thus, I also do not buy the reckless assumption that bankruptcy is bad all around. Drunk driving? That’s bad all around. Filing bankruptcy? Not so much.
Wait, there’s more
Dave also says this:
I would never say that bankruptcy is as bad as losing a loved one, but it is life-altering and leaves deep wounds both to the psyche and the credit report
.
So does appendicitis and the pain of an appendectomy (and it will hurt your credit report if you have no or lousy health insurance). People get over it and they move on with their lives once they have their appendix removed. People also get over it and they move on with their lives once their debt is cleared up or reorganized in a more manageable way. They also tend to sleep better. Deep wounds to the psyche? In all of my years of practice, I have only met one person who claimed to have known someone who had deep wounds to their psyche because of their prior bankruptcy filing (I didn’t meet this person, I only met someone who they knew). At the risk of sounding like I am giving some personal insult, the “deep wounds” he speaks of say more about Dave than they do about bankruptcy.
I also have to be fair. Dave also says this:
As a result of my bankruptcy experience, I don’t like bankruptcy. Do I hate it? Yes. I always look for another solution. Do I tell my listeners never to file bankruptcy? No. I have never done that. Does my team send clients to bankruptcy attorneys for advice on this area of law? Of course. We treat it the same way we treat divorce. We hate that, too and we look for another solution. But if that becomes the only way out, we want them to get the best help possible and move on to a better life when the process is over.
Funny though, I don’t hear him say this on TV or the radio, and it took a few clicks to get through to it on his site. The link to that is here. That’s a bummer. Because people might end up staying in a painful situation because they believe this guy will lead him to a better solution.
The good people who find themselves having to think about bankruptcy never feel good about it. More often than not, they come to my office feeling a sense of shame, anguish and embarrassment. And I’m a nice guy. We offer beverages and have a nice candy dish in the reception area. People rave about my receptionist and how welcome she makes everyone feel.
Hilarity aside, they already feel awful because they are at a point where they realize that their financial situation has evolved into a morass they can no longer control. And they might be starting to learn some things they wish they did not have to learn: about their decisions they made, or about themselves.
Sometimes, those feelings arrive when they bounce a check. Sometimes, those feelings arrive when there is an auctioneer on the front lawn. And for most others, those feelings arrive at some point in between. Whenever those feelings of hopelessness arise they need sound, individual assistance that takes into account their finances, their feelings, and their goals. You can’t get that from any Pop-Financial-Guru. And you can’t get that from Dave Ramsey.
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Tags: Bankruptcy, Commentary, Dave Ramsey, Pop Financial Gurus
You should listen to his show more than just searching out a few sound bites. Almost daily someone calls in with a lot of debt and have been encouraged to file bankruptcy. Yesterday, a guy had $60k in debt and was thinking of filing. Once Dave broke it down and saw that selling the two cars he shouldn’t have had in the first place, he was $20k in debt and nowhere near bankrupt. What Dave actually says on his show is that one should do everything possible first.
Somehow, you missed Dave’s favorite saying on this topic … “asking a bankruptcy lawyer if you should file bankruptcy, is like asking a dog if it’s hungry.”
I wish you had read my post a little closer rather seizing an opportunity to cheer for Mr. Ramsey.
I didn’t search for sound bites. I merely read his website and if you clicked the links, you’d see that they were taken from his website (and there’s a link to one of his sites on my Resources page). If you are able, please post a link with “Mr. Ramsey’s favorite saying on this topic…”. I do not want readers making any unfounded assumptions about this statement without a link.
As I stated:
“I also have the decency to talk someone out of bankruptcy if I thought it was an unwise decision.”
On that note, and to address the comment you attribute to Mr. Ramsey: I’m no dog, nor am I ever that hungry. There may very well be attorneys that you or Mr. Ramsey may be acquainted with that fit that description. I am not one of them.
With that said, I sincerely hope that Mr. Ramsey did not utter such a statement. I do not want people struggling with debt to erroneously assume that bankruptcy attorneys offer them nothing more than door-to-door vacuum cleaner salesmen.
Thanks for chiming in.
–Bill
Filing bankruptcy doesn’t change lifestyle or create income. These are 2 things that need to be changed in order for a person to get their financial life back together, otherwise, you’ll see them again in 7 years.
You said you tell people not to file for bankruptcy if they need it, but I bet that is rare. You ARE a bankruptcy attorney after all, so I’ll have to take your comment with a huge grain of salt.
And yes, I’m a DR fan. He’s been doing this for 20 years, with millions of listeners and viewers. I’d hardly call him a “pop-financial-guru”.
You didn’t respond to the point of how on his radio show Dave encourages, inspires, advises, and gives hope to those who are hurting and are faced with bankruptcy. Most cases can be solved with selling a car or two and getting intense and focused on living on nothing, working extra jobs, and paying down debt. He shows people that bankruptcy is not the only answer. Bankruptcy treats the symptoms not the disease. I dont know the numbers but I would guess the majority of people who file bankruptcy, file multiple times. It doesn’t teach you to live on less than you make. Its a quick fix.
Now, you have to be truthful here. You may be an exception but the typical bankruptcy lawyer is not going to turn their clients away who are looking for a way out. A bankruptcy lawyer is not going to sit down with their clients and look for other ways to get out of their financial mess. That’s like a Ford car salesman telling his customer, “This Ford Taurus is not for you. You should look into a Chevrolet Malibu.” Come on, get real!
And I believe this blog is written with the purpose to undermine Dave’s work. I bet you had a few clients come talk to you and they said “Well, Dave said…” Then you started thinking who is this Dave guy. I’m gonna check him out. After reading a few excerpts from the website, you don’t like what you read cause it takes away from your business.
One other thing, divorce… really you would recommend a divorce? Come on man. That’s one of the reason’s our culture is so screwed up and kids have difficulty searching for a positive role model or feeling loved which leads to much worse.
He utters it about once a week. Again, listen to his show. You can listen free on daveramsey.com. Maybe you are the exception. If so, you for sure should promote that fact.
John,
You raise a good point: among other things, it takes a change in lifestyle and means by which to create income to build financial stability for people and their families. However, there are other issues as well: illness, job, age, etc., all of which are unique to a persons situation. Sometimes, people face bankruptcy because they made bad decisions. Others face bankruptcy because bad decisions were made that affected them.
And as for telling people not to file: without belaboring the point, it happens more than you think.
–Bill
Chris,
You stated that “Most cases can be solved with selling a car or two and getting intense and focused on living on nothing, working extra jobs, and paying down debt.” By the time many of my clients have come to me, they have already liquidated their retirement, tapped out the home equity, and been spending a considerable amount of time robbing Peter to pay Paul. They are also coming to me because they did not prepare well enough for those things they cannot control: like a job loss or family illness.
If Dave is helping them “cure the disease” as you put it, he is probably helping far more people when they are first realizing that there is a problem…which I am willing to bet is long before they think of coming to me. And that’s a good thing.
I cannot and will not speak for other bankruptcy lawyers (at least not on this topic). I can only speak for myself. I stand by my prior statements.
Actually, it’s not my intent to “undermine” his work. It’s rather to inform and to help people make informed and educated choices about what’s best for them (which is what any good lawyer would do). It is my hope that people will get all of the information they need and then make the best decision that is best for their individual circumstances – and do it earlier, rather than later, when they have more options. You must at least acknowledge that but for the very limited advice he can give to callers on his radio and television shows, Dave Ramsey cannot provide that level of individualized counsel and advice. And that’s what I stress in my blog.
And on whether my clients have come in and said to me “Well, Dave said…”, you are partially right. I have had clients rave about the post-filing/pre-discharge debtor education course he offers (and is linked on this website). I have never had clients come to me before filing telling me what they heard Dave Ramsey say.
Dave has a “one size fits all” message on his website. The point of my blog is to remind people that “one size” rarely, if ever, fits all and to find out what is best for their individual needs, goals and problems.
I hate to get off topic: but if a friend or relative came to you and told you their spouse or partner was abusing them, what would you tell them? Stay together and work it out for the kids? Get real.
Thanks for your comments,
–Bill
“I have never had clients come to me before filing telling me what they heard Dave Ramsey say.” – Dave got to them first, I guess.
You really should listen to the show for a couple of weeks to get the full impact. The gist is that this stuff is mainly about behavior. People call in all the time that have already filed bankruptcy, didn’t change their habits, and are right back in the same boat.
You can’t pickout part of what Dave says without looking at the totality of it … do a budget, live on LESS than you make, have an emergency fund, etc.
As far as the “psyche” issue, just google Bankruptcy and Stress and you might get an education. Your statement that “People get over it and they move on with their lives once they have their appendix removed. People also get over it and they move on with their lives once their debt is cleared up or reorganized in a more manageable way. They also tend to sleep better.” is probably true for a lot of people. They can go right back into the habits that got them there in the first place.
“Of course, I would expect to be asked for that opinion – I would not just approach some random couple on the street who were fighting and offer my unsolicited opinion.” – I am not sure what all of this is about. There is a reason it’s called THE DAVE RAMSEY SHOW. Dave is an expert on his opinions.
He does try to unpack the details, but often tells folks they need more advice than a 3 minute radio call and should seek further advice. However, on the vast majority of calls related to people thinking of bankruptcy, it doesn’t take 3 minutes to see that the caller is nowhere near bankrupt and most of the time has a lot of other options. In Dave’s words on these cases, filing bankruptcy is like dropping an atom bomb on an ant.
I do commend you for approving comments that may disagree with you. I see from your other posts that you have Dave are in agreement on the bailout and government debt. You should try listening to his show. There is a lot more to it than bankruptcy. You can listen to all of the archives free daily at or every night on the Fox Business Channel.
By the time most people come to me, they are beyond benefitting from whatever advice Dave Ramsey can provide. Someone who merely feels pressure of paying their bills is not a candidate for bankruptcy. And as I have said – quite a number of times on this site and in this particular discussion – I will not file bankruptcy for any client that I do not believe should be in bankruptcy.
Let me give you an example: last week someone asked me if they could file bankruptcy – specifically chapter 13. They were two months behind on the mortgage. Two months behind on car payments. And only $1500 in credit card debt. They also shared various facts about their lifestyle that in my opinion, required change. I told them no, and I gave them my opinion why. Will they go out and find someone who will tell them what they want to hear? Maybe. But it will not be me. If they are foolish to file bankruptcy, they will pay a heavy price.
At the risk of appearing snippy, I do not need to google “Bankruptcy & Stress.” I have been practicing bankruptcy law for over 10 years, and been doing it almost exclusively for 4. I write about it (here and elsewhere), study it, give seminars on it, and generally consider it one of the big reasons that gets me out of bed in the morning.
We’re all “experts on our opinions.” But any sound opinion is based on facts, and when a client comes to me, they get an opinion based on the facts of their individual situation.
And to address a really important point you make: “…do a budget, live on LESS than you make, have an emergency fund, etc.” I could not agree more. But our world is not so simple, and the financial issues facing people now – and that will face people in the future will only grow more complicated. I would love to discuss why this is, but there is no simple answer. That discussion is for another day – and perhaps another blog.
Thanks for keeping this dialogue going…I hope this discussion helps people make the right decision that they feel best for them.
–Bill
PS, as for approving comments, so long as the discussion is related to the topic, and it’s not patently offensive, it will get approved. If I were concerned about people disagreeing with me, I’d really have to consider changing professions. Please know that in almost all cases, links in comments will be deleted.