A few weeks ago, I came across this article by Dave Ramsey. In case you don’t know, Mr. Ramsey is an author and radio personality who gives advice about financial matters. His programs may work for many people and he may have some good ideas about investing, but his “Truth About Bankruptcy” article was off-base.
– Let’s start with his opening, “Truth: Bankruptcy is a gut-wrenching, life-changing event that causes lifelong damage. [Y]ou know it’s a living nightmare. It can devastate your job, destroy your marriage and steal your peace of mind.”
Nearly all of my clients will tell you this simply wasn’t true for them. The marital stresses and gut-wrenching, painful experiences were the events that caused the financial troubles, the constant calls and threats from debt collectors, the financial “experts” calling them failures and blaming them for their situation, or the waiting before finally seeking legal help. Bankruptcy lawyers help relieve those stressors and that pain, we don’t cause them.
I compare it to the emergency root canal I had during final exams in my first year of law school. The pain was unbearable, but the dentist relieved the pain with the root canal. It would have been great if I hadn’t needed the root canal in the first place, but it was the best solution for relieving the pain. Same with bankruptcy. It would be great if no one found themselves in terrible financial straits, but bankruptcy may be the best solution for relieving the pain.
– Mr. Ramsey goes on to say that he will talk anyone out of filing bankruptcy if given the chance. This kind of one-size-fits-all legal advice is irresponsible. Of course bankruptcy isn’t for everyone. A good bankruptcy attorney will explain all your options once he/she understands your situation. The opposite end of the spectrum from Ramsey’s advice would be, “Some people don’t need bankruptcy, but I will still talk you into filing bankruptcy if given the opportunity.” Such a statement would be bad legal advice and equally irresponsible.
– Next, we come to a pitch for Ramsey’s services, “Most bankruptcy cases can be avoided with proper help, such as our certified counselors…” I’d go a step further and say that nearly all bankruptcy cases can be avoided, just like nearly all root canals can be avoided. If you’re content to live with the pain, no one is going to force you to treat it. I explain alternatives to bankruptcy to all my clients. When I believe one of those alternatives is in the client’s best interests, I advise accordingly. I’m not unique; any reputable bankruptcy lawyer does the same thing. Unlike Mr. Ramsey, we don’t eliminate options that may be in our clients’ best interests without understanding the individual facts of the situation.
– The article ends with this quote: “I know from personal experience the pain of bankruptcy, foreclosure, and lawsuits. Been there, done that, got the t-shirt, and it is not worth it.” If you’ve read this far, you can probably already point out the flaw in his reasoning. Bankruptcy can’t be lumped in with foreclosure and lawsuits. Bankruptcy typically is the cure for people who have already been sued or been served with foreclosure papers.
Mr. Ramsey filed his own bankruptcy years ago. I wonder why he feels it wasn’t worth it? Would he have been in the same position he is in now had he not discharged his debt? Does he believe he would have been further ahead if he’d not taken advantage of the fresh start bankruptcy provided him? Would he have preferred debt collectors to keep hounding him and garnishing his wages to keep him from getting ahead?
I’ve never met Dave Ramsey. He might be a lovely person and some of his advice might be great for certain people. But his blanket advice to avoid bankruptcy, even when it’s the best solution for your particular problems, is simply poor legal advice. If you want the “Truth About Dave Ramsey’s Opinion of Bankruptcy,” visit his website or listen to his radio program. If you want the “Truth About Bankruptcy,” contact a local bankruptcy attorney.
What do you think? Is Dave Ramsey right when he says bankruptcy should be the last resort for everyone? I welcome your comments below.
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