Dave Ramsey and His Un-Truth About Bankruptcy

So here I am, minding my own business and what does divine intervention deliver in front of me, a link to The Dave Ramsey page titled the Truth About Bankruptcy.

I really wonder if Mr. Ramsey actually believes some of the rubbish he prints. Sometimes it seems to me he is so vested in his old points of view that he has not updated and revisited them.

Dave Ramsey says, “If you’re facing the prospect of bankruptcy or in the middle of it right now, you know it’s a living nightmare. It can devastate your job, destroy your marriage and steal your peace of mind.

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. Few people who have been through bankruptcy would report that it is a painless wiping-clean of the slate, after which you merrily trot off into your future to start fresh.

Don’t let anyone fool you. I have been through bankruptcy and have worked with bankruptcy for decades, and it is not a place you want to visit. Bankruptcy is listed in the top five life-altering negative events that we can go through, along with divorce, severe illness, disability, and loss of a loved one. 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.” Source

I’ve been through bankruptcy myself, just like Dave has and I’ve helped people since 1994, nearly as long as Dave Ramsey has but my experience is exactly the opposite when it comes to bankruptcy. As far as I can see, most of the negative press and stigma about bankruptcy comes from fear mongering about a process that is legally sanctioned and permitted under the law. In fact bankruptcy is initiated by the consumer with the blessing and cooperation of the courts.

Are some people traumatized by bankruptcy, yes. But the largest source of those fears is the very stuff Ramsey and other debt advisors blurt out without considering the consequences. In my experience, once you make sure the individual is a s fully informed as possible about the bankruptcy process, the fear is greatly reduced and the knowledge that the person is now protected under the law from creditors is comforting.

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It is very easy to repair credit after bankruptcy. I would argue that if it takes you years to avoid bankruptcy and limp along paying what you can under the Ramsey approach, that your credit remains worse for longer.

I would no more talk anyone out of bankruptcy than I would talk them into years of on the edge financial living, encouraging themselves to be sued and remaining in the pain and stress of money troubles. Honestly, which is more cruel?

Seriously, people need to stop drinking the Dave Ramsey Kool-Aid at times and investigate all debt relief solutions for themselves so they can make an educated and informed decision.

If someone is looking forward to remaining in collections, being sued, ruining their credit for much longer and struggling for years to repay their debts, that’s their own choice. But if repaying the debts is the end game that Ramsey wants people to achieve, why not recommend people to get the protection bankruptcy has to offer and still repay your debts in full. There is not one thing that prevents that. In fact with that approach the interest rates go to 0% and the total amount paid is much less than with the Ramsey punishment approach.

Let’s look at the individual approaches:


  • You get legal protection from creditors.
  • Lawsuits are stopped or prevented.
  • Judgments and wage garnishments are stopped.
  • Interest is stopped and goes to 0%.
  • You can return faster to being able to save an emergency fund.
  • Your house can be saved from foreclosure.
  • Your car can be saved from repossession.
  • A repayment plan can be created based on what you can afford.
  • Debt collectors not legally able to contact you.
  • Credit rebuilding starts faster.
  • Depending on how far you are behind on your debts bankruptcy can actually increase your credit score.

The Dave Ramsey Punishment Method:

  • Collection calls continue.
  • Debt collectors continue to chase you and may even call your job or neighbors.
  • Your credit remains trashed.
  • Lawsuits can be filed for not paying your debts as agreed.
  • Your wages can be garnished.
  • Interest is increased on past due accounts.
  • Additional fees and penalties are charged on past due accounts.
  • Original balances can increase significantly due to fees, penalties and increased interest.
  • Your home cannot be protected from foreclosure.
  • Your vehicles cannot be protected from repossession.
  • You can’t effectively rebuild your credit until all the past due credit has been satisfied.

So please, do yourself and me a favor, if you have ruled bankruptcy out because Dave Ramsey has scared you about it, you owe it to yourself to click here to find a local bankruptcy attorney you like. Go talk to the attorney and get yourself educated about bankruptcy and what it is really like. Once you do that then you can make good decisions based on knowledge, not fear.

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60 thoughts on “Dave Ramsey and His Un-Truth About Bankruptcy”

  1. I think is reckless to say that filling bankruptcy isn’t as bad, you are basically telling people to walk away from paying business back. In order to grow sometimes you have to go through the pay that you caused and if that means creditors calling, living way below your means in order to make payments to the credit card or other bills that your wracked up then you need to live with that for a few years. The amount of people who file for bankruptcy once and file a second time is not a good percentage. The bankruptcy word should never be taken as lightly and the way you compared both is kinda disgusting. If you were a business owner and did not get paid for a service because the person filed for bankruptcy you would be the one suffering and your family would have to pay for that and perhaps even employees for said company.

    • What do you think the refilling rate is for Chapter 7 bankruptcy? You can’t look at Chapter 13 rates since Chapter 13 is often used as a temporary measure to deal with a short underlying situation and then dismissed. There is also a big difference between a repeat filer after 8 years and an abusive filer. While a small percentage of people do abuse everything, the vast majority of cases are found to be legitimate.

      For example, in the last published data, out of 345,058 there were sanctions against attorneys in 15 cases. In 520,925 there were 25 cases with sanctions. – https://www.uscourts.gov/sites/default/files/bapcpa_all_1231.2016_0.pdf

      There is a big difference between walking away from a debt you can pay and using a legal remedy to get a fresh start as described in the Constitution. Even our founding fathers felt the role of bankruptcy for a fresh start is important.

      It all comes down to a personal decision of trying to repair the past or the future. With the massive looming retirement crisis at hand, it makes logical sense for people to close the door on financial mistakes and do better moving forward.

  2. I’m in the Ramsay class right now. I like that his sense of humor has built my wife’s affinity toward him, broken down her walls on “I can do whatever I want, that’s why I went to school” mentality. I can live with less now, to “live like no one else.” He has set forth a plan that the masses can deal with, and improve their life.

    Morality aside, religion aside – I don’t understand where he’s coming from when he says “FICO doesn’t matter.” He shows a picture of proof that he doesn’t even have credit anymore, but recommends we pay down our debt. Like I said, morality aside, why wouldn’t he recommend bankruptcy if his schtick is to eliminate all debt and pay cash for everything!?

  3. Thing is for me since my Bankruptcy I have found it nearly impossible to find a job. In this economy when businesses can be picky about who they hire having a bankruptcy on your credit report definitely holds you back.

  4. The Dave Ramsey plan is the way to go. You did not get into your predicament overnight and you won’t get out of it overnight. Paying your creditors off is the moral thing to do.


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