I Do Not Understand Dave Ramsey

Most of us know of Dave Ramsey.  He is the former real estate high flier that came cashing down to earth at a young age, only to file bankruptcy himself and start over.  And, start over he has by preaching to the masses about the irresponsibility of debt.  He has classes, has written books on the subject, has a radio show and gives lectures to sold out audiences.  He has been nice enough to speak at seminars and organizations of bankruptcy attorneys.  There is probably not one bankruptcy attorney that does not believe in Dave Ramsey's overall goal of people getting out of debt, downshifting their expectations, and providing properly for their families.  All good goals.

What I disagree with is his reluctance to advocate bankruptcy for many of those that desperately need to get back on the right road.  Under his Myths & Truths section on his website, and on his radio show, he advocates against the practice.  His point is that bankruptcy is a "gut-wrenching, life-changing event that causes lifelong damage".  Really?

He says the myth is that to filed bankruptcy to start over "seems so easy", but this is really a straw man defense.  Nobody says it is "easy".  Few, if anybody, that visit a bankruptcy attorney believes this is an easy solution.  They believe it is a necessary solution.  It is not accurate to say the process is said to be "easy" and the opposite is true, and therefore bankruptcy is the wrong idea.

As for the "life changing" aspect of which he objects, I thought that was the whole point of his system and method.  To have a life changing affect on who people deal with and eliminate debt.

I guess he argues that "lifelong damage" is the difference.  But, what is the "lifelong damage".  It hurts your credit rating?  First, as too many bankruptcy attorneys can see, now that they have to run these credit reports on people before filing, most FICO scores are estimated, and do, substantially increase with the filing of a bankruptcy.  Besides, Ramsey's whole point is not to incur debt.

Is the damage spoken and written of about stigma?  Ramsey, as I understand it, filed bankruptcy.  There is a stigma to bankruptcy.  There is also a stigma in having to reorganize and fight with your creditors for years at a time.

The easy part of the equation is that most people cannot deal effectively by themselves with a catastrophic debt problem.   How much long range planning, how much individual negotiations with creditors, how much stress can one take?

None of us see any "lifelong damage" to bankruptcy.  Some people have a lot of problems with unemployment or illness and the like, but those who file almost always recover relatively quickly.  And, the filing of a bankruptcy should not conflict in any way with Mr. Ramsey's books, radio show, lectures and courses.  It is all valuable advice.

A comparative analysis of the what best suits a debtor's exact needs is always good.  But, bankruptcy is not a myth.  It is a solution that fits a good number of people.

It is the automatic stay of which my law firm enforces that is the benefit that is just incomparable to any other system.  It is what allows individuals and families to achieve a fresh start.  After all, is that not what Ramsey, all bankruptcy attorneys, and most debtors really want to achieve -- a fresh start.

Comments

[James J. Cerbone, Esq.]

Hi Chuck - I noticed the same thing about Dave Ramsey and I once sent him an email (pasted below) on the topic with no response back from him of course. (I doubt he reads all his emails anyway). By the way, I love your website.
Jim Cerbone, Esq.

Hi Dave:

I love your show and believe you perform a great service and benefit to your listeners and website visitors. However, I know personally that you are being very misleading with regard to the topic of bankruptcy. I know this because, I have filed bankruptcy over 3,000 times in the past 15 years. Well,... Not me personally, but for my clients because I am a Bankruptcy Attorney in New Jersey. If what you say, on your website was actually true, I would "gladly" not file another bankruptcy case.

You Say: Truth: Bankruptcy is a gut-wrenching, life-changing event that causes lifelong damage.

The actual Truth: Yes, bankruptcy is a big decision. It should and is a matter of last resort for most if not all of my clients. Bankruptcy is a choice that is gut-wrenching only at the time leading up to the decision. Let's face it, nobody WANTS to file bankruptcy, we want to make money, pay our bills and live happily ever after. However, in fifteen years I have had no clients express remorse for such a decision afterwards or experience lifelong damage.

You Say: Bankruptcy. It can devastate your job, destroy your marriage and steal your peace of mind.

The Actual Truth: I have seen first hand how bankruptcy helps someone keep their job: If you have a security clearance and have large amounts of revolving debt you will lose your job unless you pay it or file bankruptcy. The Government will not wait for you to pay it down over many years. Also, the same holds true for many other fields such as a career in the banking industry. Bankruptcy prevents creditors from calling your job and gives peace of mind to be more productive on your job. I could go much further, but the point is that bankruptcy actually saves peoples jobs.

I have also seen firsthand how bankruptcy saves marriages. I have had so many couples over the years, come to see me on the verge or in the process of divorce because of the financial stress and fights that result from it and end up able to reconcile/recommit to each other once that stress is gone via the bankruptcy. I have never had a couple get divorced because they filed bankruptcy, that would be ridiculous and if such ever happened I would question the level of marriage commitment in the first place.

As to stealing your peace of mind. Do you realize the "peace of mind" that someone has by the time they make the gut wrenching "DECISION" to see a bankruptcy attorney. There is none. Certainly, the bill collectors who are calling them 10 times a day at all hours, calling neighbors, relatives, employers and repossessing their cars have taken what little peace of mind was left. Remember: the average person who files for bankruptcy got into that position through no fault of their own, they did everything right. It is a statistical fact and I know personally that most people who file for bankruptcy got into their position due to a layoff, Illness, or income reduction.

You go on to give your "Kathy" example on your website: ie; Kathy called my radio show ready to file bankruptcy. Her debts were overwhelming, and her cheating husband had left with his girlfriend. The house was in his name, as was all the debt except $11,000., etc......

The truth is: I doubt I would advise such a person with the scenario same as "kathy's" to file a bankruptcy. Your example again, just shows me your misunderstandings about bankruptcy, I know as someone who is on the front lines and knows personally the type and level of financial trouble the "average" person who actually files bankruptcy is in. Your example of "kathy" is essentially someone who has no more debt that the average american household. Thankfully less than 1% of our population needs to and actually files for bankruptcy. I can't speak for other attorneys, however, no honorable bankruptcy lawyer would say that every american should file for bankruptcy.

I could go on with the rest of your webpage, and will gladly do so if you ask. However, you should put a real example of the average persons circumstances who is actually seriously thinking about bankruptcy and not a scenario that a legitimate bankruptcy attorney would advise against filing.

Bankruptcy helps honest people get a fresh start and get on with their lives. Do you really think you would be as successful as you are today, if you did not file for bankruptcy yourself in the past? I seriously doubt it. My typical clients mind is so pre-occupied with everything from stress, robbing peter to pay paul, arguments with the spouse, depression and yes for some people thoughts of suicide. Can you really run a business, work a job productively or even plan for your future with all of that running around in your head. Bankruptcy puts an end to it all and has given my clients the second chance to be successful, in the same way it obviously did it for you.

If you have read this far, thank you.

James J. Cerbone, Esq.

2130 Hwy. 35, Ste. 227

Sea Girt, NJ 08750

732-681-6800

[Mark]

In my opinion, bankruptcy is or should be a last resort option. It is rarely a life-changing event or one that causes life-long damage. I have known several people who have gone the bankruptcy route just to fall into the same credit schemes that got them into trouble in the first place. Debt of all kinds leading to payments and then the unplanned event which "caused" them to have to once again file bankruptcy. Dave Ramsey shows a better way to live than going into and living with debt. Debt is a snake, and when you play with snakes you get bit.

[Ted Sliwinski]

Please post my site.

[Elcorin]

Hello,
Great job. But not enought info. Where can i read more?

Thanks
Elcorin

[Timothy Woods]

Obviously James has never filed bankruptcy himself! Or he would know first hand how life changing it really is. Sure, when I met with my attorney to file for bankruptcy he was my new best friend. I would imagine that none of your client's would tell you anything different. The imediate feeling is relief when you file, but soon after the dust settles you realize your mistake. In addition, yes filing bankruptcy did almost cost me my marrige and we are still strugling to get back on our feet.

I don't wish bankruptcy on my worst enemy and If you JAMES had to go through it yourself you would feel the same.