Why Your Tax Refund Keeps Disappearing Into Debt Without Results
Every year, millions of Americans get a tax refund and throw it at their credit cards — then watch in frustration as the balance barely moves. Steve Rhode and Damon Day explain why this approach almost never works, and what a real debt strategy actually looks like.
Steve Rhode: “The refund wasn’t the strategy. It never is every year. The strategy is huge.”
ADHD, Budgets, and Why Standard Money Advice Fails Millions of People
One of the most important conversations in this episode has nothing to do with tax refunds — it’s about why standard money advice, including Dave Ramsey’s baby steps, simply doesn’t work for people with ADHD or ADHD-like symptoms caused by financial stress.
Steve Rhode wrote a companion article on GetOutOfDebt.org with a subtitle that says it all: “Why Standard Money Advice Assumes a Brain You May Not Have.” The core insight: budgets require sustained working memory, impulse control, and consistent re-engagement over months. ADHD disrupts all of these capacities — not because someone is lazy or dumb, but because of brain chemistry.
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Damon Day: “If all the advice you’re getting is tailored towards one segment of the population, but you don’t fit that — if your brain works a little bit differently — the standard ‘just buck up and create a budget’ is never going to work.”
The Dave Ramsey Problem Nobody Talks About
For a full breakdown, see What Dave Ramsey Gets Right — and What He Completely Misses.
Steve Rhode makes a pointed observation: how many times has Dave Ramsey ever asked a caller whether they have ADHD before dispensing advice? Approximately 10% of adults meet the ADHD diagnostic criteria — and people in financial distress experience ADHD-like symptoms even without a formal diagnosis.
Steve Rhode: “When you add money stress and pressure, your IQ actually drops, your attention span drops — and you end up experiencing the very same thing that people with ADHD do.”
The solution isn’t to budget harder. It’s to automate the decisions the budget was meant to govern. Set up autopay. Link savings to a high-yield account. Remove the moment-to-moment decisions that ADHD brains are poorly equipped to handle consistently.
What to Actually Do With Your Tax Refund
If you’ve already spent it, that’s okay — April is a fresh start. If you haven’t received it yet, resist the impulse to simply throw it at whichever card feels most urgent. That approach leaves you in the same position next year.
The refund is breathing room — a moment to step back and build a real strategy. Damon Day recommends using that window of clarity to automate: adjusting your withholdings if you consistently get large refunds, and immediately routing that extra monthly cash into a high-yield savings account before it disappears.
Private Student Loans, Bankruptcy Timing, and Costly Mistakes
This episode also covers why private student loans can sometimes be discharged in bankruptcy (a 2023 Duke Law Journal study found 499 out of 500 eligible borrowers never even tried), and why the timing of a bankruptcy filing can be the difference between Chapter 7 and a five-year Chapter 13 repayment plan.
The bankruptcy means test looks at your income over the previous six months — not your annual income. If you were recently laid off, filing immediately may be a costly mistake. Waiting even two or three months for low-income periods to enter the window can change the math entirely. For a deeper look at how to eliminate student loans through bankruptcy, the full process is covered step by step.
The Bottom Line
The refund isn’t going to fix the debt. The budget probably isn’t going to stick long-term. The path forward is understanding which tools match how your brain actually works — and getting help from someone who looks at your full situation, not just the numbers.
Dealing With Debt? Understanding your options is the first step. See how all your debt relief options compare — including ones most sites won’t tell you about. The Find Your Path quiz gives a recommendation based on your actual numbers, and the Scam-O-Meter checks any company’s complaint history before you sign. Federal Reserve research shows bankruptcy filers recover faster than those who don’t file.
Key Takeaways
- Throwing your tax refund at credit cards without a strategy almost never changes your debt trajectory — you'll be in the same position next year.
- Standard money advice, including Dave Ramsey's baby steps, assumes a neurotypical brain — it's designed for people without ADHD or chronic financial stress.
- About 10% of adults have diagnosable ADHD, but financial stress causes ADHD-like symptoms in anyone — lowering IQ, shortening attention spans, and triggering avoidance.
- The fix for ADHD and debt isn't to budget harder — it's to automate decisions so the right things happen without requiring sustained willpower.
- 499 out of 500 people eligible to discharge private student loans in bankruptcy never even tried, according to a 2023 Duke Law Journal study.
- The bankruptcy means test uses the previous six months of income — not your annual earnings — so filing immediately after a job loss can be a costly mistake.
- Your tax refund is breathing room, not a solution. Use that moment of clarity to set up automation and build a real debt strategy before the money is gone.
Full Transcript
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Episode Introduction
Steve Rhode: Hey you’re back with the get out of debt guy show i’m Steve Rhode the old original get out high production quality these old lips and tongue they just know not working today. So uh and i’m back with as always the new get out of debt guy damon day say hello damon Hello, Damon, Excellent job Well, we’re back talking about tax refunds, Which is the topic that we have scheduled for this show And we will talk about, you know, what happens if the tax refund hits your account And what you’re going to do with it Maybe you’re going to spend it Maybe you’re going to pay off debt I don’t know You don’t know And maybe you’re looking at your credit card balance and it barely moves So, today we’re going to stop hoping for windfalls and start building a strategy that actually works. But, that is good information, people following along. We’re panting out of breath waiting for this show because we teased it last week. But as we do these days, Damon, you pick out three stories that I’ve written in the last week on getoutofdebt.org. Oh, and if people want to reach you, they can go to damonday.com, D-A-M-O-N-D-A-Y.com. And that’s how they can get you and have a free consultation with you and do a little chitty chat. But so the three stories.
Damon Day: You can have a chitty chat.
Steve Rhode: Well, you have helped people that have cat sanctuaries, so you could have a kitty cat chitty chat.
Damon Day: I literally have helped people with cat sanctuaries.
Steve Rhode: All right. So, um, I’m actually more excited about the three stories that I wrote and that you picked to talk about before we get to the tax refund. So lay it on me, man. What are the three stories?
Damon Day: So the first story, if you want, you know, any more details on any of these stories that we’re bringing up, you can just go to the get out of debt or website. Hit the small little magnifying glass in the top right hand corner, which is hard to find, I might add. I want to make that magnifier a little bit bigger. But top right-hand corner of any page, and you can just type in whatever the keywords are that you’re looking for. And Steve has written one or two stories over the years, so I’m sure something will pop up. But yeah, he’s got, what, 25,000 some odd stories up there, articles. It’s a wealth of information.
Steve Rhode: More than you could possibly want. Today, I’m working on The Ultimate Guide to Discharging Your Student Loans in Bankruptcy. So, yeah, there’s a bunch of information out there. So what’s this first story?
Damon Day: Well, that’s a great segue, Steve, because the first story is drowning in private student loan debt. Here’s what’s actually true. And it caught my eye because most people that are struggling with student loan debt have no idea what the options are.
Steve Rhode: Hey, do me a favor before you get into it.
Damon Day: Yeah.
Steve Rhode: Tap your mic for me.
Damon Day: Am I not on the right mic? I thought I was.
Steve Rhode: Yeah, you’re on the right mic. Okay.
Damon Day: Is it too far? What does it sound like?
Steve Rhode: No, no, no. It’s just that when you lean back, the acoustics in the room changed.
Damon Day: When I lean back. Okay. Am I leaning forward? Is it better?
Steve Rhode: It’s less echo there. I don’t know why.
Damon Day: Oh. Well, I was leaning back and probably looking up at the sky.
Steve Rhode: Okay. All right. So, yeah, the title of this post is Drowning in Private Student Loan Debt. Here’s what’s actually true. Go.
Damon Day: So if you’ve got private student loans and the payments are large, which they often are, pay attention because this article we’re going to be talking, I don’t think we really talk much about the settlement option of private student loans, but we talk about the bankruptcy option, which is missed by most people, including, Steve?
Steve Rhode: Yeah, yeah, including, unfortunately, a lot of bankruptcy attorneys.
Damon Day: Including bankruptcy attorneys. They go, nah, can’t discharge those. And sometimes they are right. And sometimes they are wrong. It’s just a matter of looking at it, right?
Steve Rhode: Well, yeah. I mean, there’s this general assumption out there because bankruptcy attorneys are people too. No. Yeah. That it can’t be discharged in bankruptcy. People repeat that stuff. And granted, discharging in bankruptcy might involve one more step called an adversary proceeding. But it can be done. I think what’s most surprising is a statistic that I told you right before we started recording, which was in 2023 in the Duke Law Journal. There’s a statistic that says out of 500 bankruptcy cases where people were eligible to have their private student loans discharged, 499 never tried. Because they assumed.
Damon Day: Yeah. Well, and they’re, you know, as far as getting your student loans discharged, what you’re looking at is what’s called, I don’t know if it’s Brunner or Brunner. Steve, what’s it for you?
Steve Rhode: Yeah, it’s Brunner. I always said Brunner.
Damon Day: You could say Brunner. You could say Brunner. Either way, it’s the same thing. So what it looks at is essentially whether or not you’re, you know, in a hardship, right? It’s looking at your situation basically to decide whether or not those loans could be dischargeable. So it’s looking at whether or not you can maintain a minimal standard of living if you’re making those payments. It’s looking at your financial situation overall. And if it’s likely to persist, whether, you know, maybe you’re out of work right now, but you’re, you know, 20 years old, 25 years old, able-bodied, have a good degree. And, you know, you’re not likely to be unemployed for the rest of your life. So it’s looking at your current situation. Are you 65 years old with a chronic illness on disability, not going to be able to increase your income much more than the social security disability, than your retirement that you’re already on, and that’s creating a hardship to pay this loan, makes it more likely you’ll be able to discharge that loan versus if you were the former, right? And they’re also going to look at whether or not you’ve made a good faith efforts to pay over the years.
Steve Rhode: Right.
Damon Day: So these are the, some of the things that they’re going to look at to see if, and really at the end of the day, it’s going to be up to the judge for the most part.
Steve Rhode: And then with private student loans, one more thing that’s always interesting is the statute of limitations.
Damon Day: Yeah. You know, um, and it’s, it’s different in every state, although some states are, are the same, but you know, if you end up defaulting on a private student loan, it, it acts the same as credit cards, um, or, you know, personal loan or something like that. A lot of people get private student loans confused with federal student loans and that they, they hear all of these things. Like if I don’t pay my student loans, they’re going to, you know, they’re going to garnish my wages and they’re going to, you know, you know, come after me and take my tax refund and all of this stuff, which is true. If they sue you and they get a judgment, they could potentially do that. But they have to sue and get a judgment, which they can do and will do sometimes. Whereas the federal loans don’t have to go through that process. So federal loans are very different than private loans. So you need to make sure when you have student loans, You need to first understand what type of loan you actually have and some people will have both.
Steve Rhode: Yeah. One way to easily tell is if you go to federalstudentaid.gov, right? Is that it? That’s the, you can log in and you can try to log in and see if you have any loans there.
Damon Day: Studentaid.gov.
Steve Rhode: Studentaid. Thank you. Studentaid.gov. See, he’s retired. We forget. You won’t believe the stuff that I’ve been dealing with, so.
Damon Day: Well, and they’ve changed the name of the website several times over the years.
Steve Rhode: Yeah. Yeah, it used to be anyway. So the the other thing is that if you talk to one bankruptcy attorney and they just flat out say no, there’s no harm getting a second opinion. And and this has always been an interesting subject because there are are a smaller group of bankruptcy attorneys out there that know exactly how to deal with these. And you know like one of those guys is uh josh cohen out of vermont the student loan lawyer yeah i know josh yeah he’s he’s an attorney that has dealt with these things all the time and when you say to him hey these things can’t be discharged in bankruptcy he’ll be like ha ha ha you’re wrong, yeah but yeah some the average person the average bankruptcy attorney you talk to you Because we’ve heard everything over the years, like, it’s not possible, no way, they won’t even try, they won’t even look at it, it is possible.
Damon Day: Yeah, so the other line, there’s a lot of good information in this article, but, we’re not saying, hey, you got private student loans, no problem, just go bankrupt. But what we’re saying is there are options available and you could potentially discharge your loans in bankruptcy. And what we advise you to do is just, if you’re drowning in debt, credit card debt, student loan debt, whatever it is, just figure out your options, right? Talk to somebody that can sit down with you, go through what your circumstances are, what your situation is, what you’re likely to be able to do. It may very well be that we sit down and we go through and we You say, hey, look, you’ve got a really good job. I know you’re paying $2,000 a month in these loans, but you’re making $150,000 a year and you’re 30 years old. And yeah, things are tight, but it’s very unlikely you’re gonna be able to discharge these loans in bankruptcy. And maybe you meet with four or five bankruptcy attorneys and they all say the same thing. That might be the reality. Now that doesn’t even necessarily mean you shouldn’t file a bankruptcy if you have a lot of other debts that could be discharged. Again, you have to look at the totality of the circumstances to figure out, hey, look, I’m having a debt problem. I need to figure out the best way to deal with it. Is it a bankruptcy to maybe even get rid of some of this debt? Is it just negotiating and settling? You can settle your private student loan debts, even if you can’t discharge them in bankruptcy.
Steve Rhode: Yeah, I don’t want to bury that lead. I don’t want to bury that because people, I don’t think that they understand that. And I mean, you’ve had great success with private student loan lenders in settling these for some pretty terrific terms, too.
Damon Day: Yeah. I mean, if you struggle with private student loans, you, go to damonday.com, request a consultation. We can do a free debt strategy, right? I don’t charge anything for it. And we can look at your situation and I can say, you’re screwed. No, just kidding. I almost never say that. But what I can do is walk you through, okay, here’s some options that you can consider and look at. And then you can take that information. And now you have a roadmap of things you can start looking at and researching and deciding what it is you think you might want to do. Just sitting there paying the minimum payments Knowing you’re drowning in debt and not getting anywhere Is a strategy But it totally sucks Yeah.
Steve Rhode: It never works for the ostrich, So anyway.
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ADHD and Debt: Why Standard Money Advice Fails
Damon Day: That’s a good article If you’ve got private student loans Go to getoutofdebt.org And pop it in the little magnifying glass there And you’ll get some good information And then set up a strategy session with me And we’ll talk about it Alright, story number two, number dose um this is a a big one because it has to do with budgets suck but this article is adhd and debt why standard money advice doesn’t work and what does and i talked to a lot of people that would fall into this kind of quasi category of you know i i make good money i know i have money But I have no idea where it goes. I’ve tried the budget. I’ve tried Dave Ramsey Nothing ever seems to work for me I always just end up right back where I started after about two months.
Steve Rhode: Yeah, it’s it’s setting yourself up for failure and then feeling like a loser or you’re dumb because it doesn’t work out. If you have ADHD, you know, adult ADHD often goes undiagnosed. And if you have ADHD, this isn’t an intelligence thing. This is a brain chemistry thing. I mean, just because your brain chemistry is one way doesn’t make you dumb or stupid or lazy or anything else. It just it just is what it is.
Damon Day: Yeah like there’s a subtitle in here why standard money advice assumes a brain you may not have right so if all the advice if all the advice you’re getting is kind of tailored towards you know one segment of the population but you don’t fit that if your brain works a little bit different and we’re all very different the standard you know just buck up buttercup and create a budget and just pay more on that, it’s never going to work for people whose brains don’t work that way.
Steve Rhode: It doesn’t make them broken.
Damon Day: Yeah. So I know I’m trying to scroll quickly, but you wrote this, so you’ll know there was somewhere in here where you were kind of describing the ADHD brain and how it works. And it just made it so clear on.
Steve Rhode: Yeah. Let me sum that up for you. Squirrel.
Damon Day: Yeah. If you are often, you know, talking to somebody and go squirrel, that’s what they call a clue.
Steve Rhode: Right. it.
Damon Day: Yeah. But no, it’s a great article. We can’t go through all of it here because it’s actually fairly long. But if you’re in a situation where you have ADHD or you suspect you might have it because you’re doom scrolling all the time, you’re highly intelligent, but you’re, you know, you’re not, you never complete tasks that are not interesting to you, right? You’re always, that’s where the squirrel reference comes in. Like, I’m going to go do this thing over here. Oh, what about this? Oh, what about this?
Steve Rhode: Right.
Damon Day: And so if you kind of feel like you’re like that, Your brain works like that And you’re in debt And no matter what you’ve tried It just hasn’t worked, this will be a great article for you because it’ll provide a lot of clarity, I think, to where you’ll go, oh my gosh, oh my gosh.
Steve Rhode: That’s me. That’s me.
Damon Day: This is me. Oh my gosh. Oh my gosh. And then as you get towards the bottom, it’s okay. What will actually work for somebody that goes squirrel, right? And then instead of the standard advice, we can get some actual advice and start doing things that will work with your brain. And a lot of it is just simple stuff like putting your bills on auto pay. I’m not saying that’s going to solve all your problems, but, but read that article. It’s a really good article. The more you can set up a system, you know, when you, when you can sit down and focus. Yeah. When you sit down and focus and set up the system that can work moving forward rather than just saying, okay, I have to do this. I have to do this. I have to do this. I have to do this. And then getting upset when it doesn’t work because you can’t maintain focus over any length of time on something that is just so gut-wrenchingly boring to.
Steve Rhode: You it’s not gonna.
Damon Day: Work and who the hell wants to live like that anyway.
Steve Rhode: I do there is this one sentence in here that i think is very key that uh making only the minimum payment feels fine because the accumulating interest that’s a later problem and the adhd brain has difficulty in making later feel present.
Damon Day: Like, like here’s, uh, I’m just, again, I’m just scrolling through why the budgets fail for people with ADHD budgets require sustained working memory, remembering what you’ve spent perspective, memory, anticipating future expenses, inhibitory control, resisting in the moment impulses, ding, ding, ding.
Steve Rhode: Yeah.
Damon Day: And consistent re-engagement over weeks and months.
Steve Rhode: Oh my God.
Damon Day: ADHD disrupts all of these capacities. That’s just what it does. Right. squirrel squirrel squirrel squirrel you know a budget isn’t a bad idea in the abstract but it’s a tool that assumes cognitive resources hdhd brains don’t have so the solution isn’t a to like budget harder it’s to automate the decisions that the budget was meant to govern which is what we were just talking about right right so when you have a moment of clarity and you’re really focused for that short amount of time, that’s when you can use the budget as a useful tool. But then you take that information and then you automate what you’re supposed to do with that budget. Because if you, with an ADHD brain says, okay, I see what needs to happen and I’m going to carry out all these tasks day after day, week after week, month after month, and it’s going to work. And you know, it won’t work because you’ve tried it.
Steve Rhode: You know, 10% of the population, adult population fits the ADHD diagnosis criteria, but the people that we deal with that have financial problems and debt have manufactured ADHD. And what I mean about that is you might not have the diagnosis of ADHD, but when you add on money, stress, and pressure, and all of that, your IQ actually drops, your attention span drops, you get laser focused, and it ends up that you experience the very same thing that people with ADHD do.
Damon Day: Yeah. And it’s very easy once it gets so overwhelming to just say, okay, I’ll deal with that tomorrow. And then you go, you know, watch a show on Netflix because it just lets your brain kind of relax and I’ll deal with that tomorrow. But then that becomes a year ago and two years ago. And here’s a good one. A last point, or maybe the last point I’ll make on this article. Um, it’s kind of towards the bottom. What is time blindness and how does it affect spending? Yeah So this is really good I was reading this and I was like Huh, that makes a lot of sense We call it hyperbolic discounting On the show But time blindness is the impaired ability To perceive time and its passage This is a core ADHD feature, But when future consequences don’t feel emotionally real, present moment spending decisions aren’t moderated by the weight of those consequences.
Steve Rhode: Right.
Damon Day: So you make spending decisions without really feeling the weight of what is this thousand dollars going to cost me into the future. Right. And that’s why what Steve was talking about earlier, that’s why making only the minimum payment feels fine because the accumulating interest is a later problem.
Steve Rhode: That’s a tomorrow problem.
Damon Day: Yeah. And the ADHD brain has difficulty making later feel present. So automating a lot of this stuff, automation addresses time blindness directly. The payment happens whether or not the future feels real in the moment. So that’s why making taking a lot of these decisions away from you helps to make what you want to happen actually happen without relying on you to make the right decision in the moment.
Steve Rhode: You know, funny thing is, I don’t know how many people have ever called into like Dave Ramsey and he’s said first, hey, do you have ADHD at all?
Damon Day: You know, because this shit won’t work if you do.
Steve Rhode: That’s right. Right. Well, you know, and people don’t factor in these mental issues and the way brain chemistry and everything else and just say, hey, stop avoiding dealing with your debt, make a plan and stick to it and just make a budget. And, you know, that might be simple for someone else, but not if you have ADHD. And in particular, it creates this vicious shame spiral that I have lived through myself. I’ve seen other people live through when I was going through my bankruptcy. I felt all these things, you know, that you it’s so stressful and you have this impulse that you want to spend to help reduce the stress. You’ve got those missed bills and financial disorganization And then you notice, And it feels like deep shame, especially when you think you know or you do know what you should do. And shame triggers avoidance and it gets you circling down the drain even faster. And avoidance triggers the debt to grow. And so.
Damon Day: Yeah. I would say you always know what what you what to do and what you should do. But it’s that damn squirrel, Steve.
Steve Rhode: No.
Damon Day: The squirrel just gets you every time, man.
Steve Rhode: Yeah, so, you know, Damon understands this, and it’s one of the things to helping you create a plan to tackle your death that fits for you. Not for, yeah.
Damon Day: Yeah. It’s a lot more than, hey, you know, should I get into a debt management plan? Should I settle my debt? Should I file bankruptcy? It’s like, yeah, that’s the basic stuff. But you really have to dig down a lot deeper to see, okay, well, how do we even arrive here in the first place? So yeah, we can solve the debt, but let’s make sure we solve it and then put some systems in place. So you’re not a client of mine in four years, right? Like people love me, but they don’t want to see me again.
Steve Rhode: I was asked once on a radio show, what is the number one secret, Steve, that people need to know about getting out of debt? And I thought for a second, and I thought, make more than you spend.
Damon Day: Well, that’s plain boring.
Steve Rhode: Well, I know, but, you know, the obvious things out there are out there, but life is just not fucking obvious.
Damon Day: Especially life these days. Have you seen the prices out there, Steve? Do you venture out of your office every once in a while?
Steve Rhode: Holy shit. I wrote a post yesterday about how people are now saying that the increased cost of living and tariffs have increased bankruptcies 41% in the last year.
Damon Day: Yeah, it’s like, you know, can I run a tab at McDonald’s? Can I start buying a Big Mac on credit, please? You know, you can with these buy now, pay later things. You can literally, yeah, you can literally door dash on payments. Can I get that pizza on three easy payments? Like, when does this jump the shark to the point like, are you serious?
Steve Rhode: I was ordering something the other day and I went to check out and they gave me the Klarna pitch. and it was like, your payments will be 80 cents.
Damon Day: I don’t need to put that. That’s where we’re at. I mean, that’s how expensive everything is. And that’s why now more than ever, you have to get out of debt. You can’t, budgets are too tight. You know, expenses have risen exponentially faster than income.
Steve Rhode: Oh, absolutely.
Damon Day: So you have to, if you even want to survive, you have to cut the fat. And servicing past debt is the first fat that needs to go. I don’t care how you do it. I don’t care if you file bankruptcy. I don’t care if you settle the debt. You know, Dave Ramsey, debt snowball is working for you. That’s fine. Even that’s melting. Well, that’s getting harder and harder. It’s kind of going the way of like the credit counseling programs. There used to be great solutions back when you were doing it. And now they’re getting squeezed. It’s like, okay, you’re lowering my interest rates, but I still can’t afford the payment. So how is this helping me? Right?
Steve Rhode: Yeah.
Damon Day: But now more than ever, you’ve got to get rid of that debt. You’ve got to cut the fat. If you don’t want to put your pizza on payments, you’ve got to get out of debt.
Steve Rhode: Of one slice, please.
Damon Day: One slice spread out over three easy payments.
Steve Rhode: Yeah. Well, and the funny thing is, for people who listen to us all the time, they know this, which is the way society is set up and people have myths and assumptions. The stupid reality is, Your fear of doing what you need to do to do better financially is what’s holding you back, right? Because there are all sorts of solutions and plans and things that can be put together to get you out of the situation that people always suffer with. Oh, it’s not possible. I don’t want to do something.
Damon Day: 100%. Everything has consequences, including keeping the status quo, continuing to make the minimum payments. that is risky. That has consequences. Everything has a downside, including continuing to do what you’re doing, not looking at other options, not considering them. Those all have costs. Those all have downsides, right? So I know we talk about bankruptcy a lot and that now I always like to to, uh, uh, you know, throw in that we’re not here just pushing bankruptcy. We’re pushing education, educate yourself on all the options as they would pertain to you and your situation and i’m sorry but doing a deep dive on reddit is not going to give you the information that you need it’s just not i mean i’m not saying don’t look at some of this stuff but there’s so much misinformation on the internet and and information that might be right for the person that wrote it but is completely wrong for you yeah you know that you just get yourself in trouble more often than not so talk to somebody that knows what the hell they’re talking about. That’s good advice.
Steve Rhode: All right. Story number three.
Damon Day: Story number trace. Oh, speaking of, we don’t talk about bankruptcy all the time. So this one.
Steve Rhode: Well, hold on. I do have a thought that I had forgotten. I just remembered it again, which is I really, I don’t have a vested interest in bankruptcy. My interest is in you. I want to save you. I want to help you. And I want you to have a better life, more financially successful, filled with less stress, be happier, enjoy what you can. That is my goal. It just so happens that bankruptcy is a tool to help you achieve that.
Damon Day: Don’t worry. Be happy.
Steve Rhode: Hey. You know, life’s a one-way journey. You’ve said it. I feel it too. Why? Why struggle?
Damon Day: You can have your credit score on your tombstone.
Steve Rhode: There’s a thought.
Damon Day: Because if the answer is no, then who that flip cares, right? In fact, that’s one thing Dave Ramsey and us agree on. Who cares about your credit score? Now, I think your credit score is important overall in the long term. In the short term, not so much most of the time. But it is easier to operate within society with a good credit score. It just is.
Steve Rhode: Yeah.
Bankruptcy Means Test: Why Timing of Filing Matters
Damon Day: Right? So, all right. So this last article, the bankruptcy means test. The reason I picked this article was because I talked to people about it on really on a daily when we’re talking about bankruptcy, because it’s very misunderstood when you’re looking at, hey, do I even qualify for Chapter 7 bankruptcy? I make X amount of dollars. So this this means test, 180 day rule, why filing at the wrong time gets you denied. And this brings up a big point that I talk to people about all the time, which is this is not about should you just file bankruptcy? Should you settle your debt? Should you do Dave Ramsey? Yeah, we’re going to figure that out. But a lot of it, regardless of what we decide to do, timing of what we do, whether it’s settlement or snowballing or bankruptcy, timing plays a big role depending on what your situation is. So it’s a lot more than just deciding what to do. It’s deciding when you should do it. And that’s where the consulting comes in. And that’s where I shine, bro. That’s what I do. So this 180 day rule, I thought it’d be fun to talk about it because this is really misunderstood when it comes to the timing. So Steve, what are some situations you could think of where, you know, oh yeah, I want to file bankruptcy, but should I file right away or should I wait?
Steve Rhode: Well, like you’ve had a job change or you’re going to change jobs or even that, uh, you’ve become suddenly unemployed, or divorced, or…
Damon Day: So here’s the way the rule works, right? When they say, oh, if you live in a state and you say, okay, the median income for a family of four people, you know, you got a husband, wife, and two kids, let’s just call it, it’s $100,000. Well, let’s say you make $105,000. That doesn’t automatically mean, oh, you’re over the median income. You can’t qualify. The way the rule works and the way it applies is it doesn’t take what you made last year. It doesn’t look at your tax return to see what your income was. It looks at the previous six months of your qualifying income before you file, right? So if you file on July 15th, it’s going to look at what you earned, what came in, what the qualifying income you made was from January to June, the previous six months. So, and then what it’s going to do is it’s going to take that number and to, not to get too complicated but essentially it’s just going to double it and that’s what your annual income is going to be technically they divide it by 12 and then multiply or whatever they do divide by six multiply by 12 yeah but but if you take the common core math part out of that they could just double. Okay this added extra steps for no reason but you just take that number of your previous six months and essentially double it and that’s what your income is so, if you’re in a situation where, oh my gosh, I just got let go. I just got fired. Oh my gosh, I don’t know what to do. I got to run down and file bankruptcy. No, no, you don’t want to run down and file bankruptcy if your income is at or above that median income number, because you may be unemployed for a month or two months or three months. You don’t know, right? So the knee-jerk reaction to file bankruptcy is usually wrong because maybe you just got a severance. Maybe that would be at risk if you file bankruptcy. But more importantly, if you’re close to that meeting income and you got fired in say the scenario of, you know, you got fired in June and you want to go file in July. Well, they do that six month look back. You’re going to have six months of full paychecks.
Steve Rhode: Yeah. But you might be unemployed. The timing is critical. Like you said, because you can let that age, right? Each month that passes since you got that last big paycheck, Um, that helps you tremendously. You don’t always have to wait six months. You might only have to wait three months before the math works.
Damon Day: So let’s say you’re, you’re, you’re trying to get a new job. You’re unemployed in July. You got fired in June. You got let go in June, unemployed in July, unemployed in August, and then middle of September, you finally get a job, right? Okay. And then let’s say you, uh, file in, um, uh, September. Well, now you do the six month look back. It’s not going to be January through June. it’s going to be March through August. And July and August, you had essentially no income those months. So now you’re filing, your income is only going to be really four months of the income that you had. And then you double that, your income for that year for the purposes of qualifying for chapter seven is going to be significantly lower. So not to overcomplicate it, but the timing matters. Imagine if you’re a teacher, forget about a job loss. Let’s say you don’t really get a paycheck for two months out of the year. Well, you wouldn’t, and you need to file bankruptcy. You wouldn’t want to file it in, you know, May, right? When you’ve been paid for those six months, you’d wait until like September. So maybe you don’t get paid in July and August or whatever that is. You’d want those two months of no income to be included in that if you were at or above that meeting income. So to sum it all up, talk to somebody, either me or a bankruptcy attorney or somebody that understands this stuff so that you don’t just rush in and do something at the wrong time because you might end up in some five-year repayment plan on a chapter 13 when you really wanted to file a chapter 7, but you filed two months too soon.
Steve Rhode: Right. I agree with you. All good advice.
Damon Day: Good article. Go check it out.
Free Tool — Bankruptcy Means Test: Wondering if you qualify for Chapter 7 bankruptcy? The free Bankruptcy Means Test checks eligibility based on your state, household size, and income — including state exemptions. Check My Eligibility →
Tax Refund Strategy: What Actually Works
Steve Rhode: Get out of debt.org. Okay. Let’s get to today’s topic about the refund. So you got the refund, you spent it. You know, it is what it is. Hopefully you spent it on something fun and improved your life a little bit. If you just poured all that refund money onto a debt and it really didn’t move the needle. Like, why? We need a plan. We don’t need to do that.
Damon Day: So get a plan before you throw it at the debt, if possible.
Steve Rhode: Yeah, I know. And tax day is coming up. So fun. So windfalls are unpredictable. You if you are getting a big refund every year it means that you should probably adjust your withholdings so that you’re getting more money in your paycheck every month instead of reducing your monthly income when you need it most and getting a big paycheck at the end of the year hey i understand why people do that it feels like, You know, it feels like he won the lottery. You’re getting a big check and go do what you want with it. But it’s not always a good strategy.
Damon Day: Yeah. And I add a big caveat to that. Do not do that until you have a solid plan of what you’re going to do with the extra money. Because if you do that without a plan, and especially if you’re a squirrel type of person, like we talked about, I will promise you that money will be gone. You won’t know where it’s going. It won’t fund any of the goals that you have because you didn’t make a plan for it. And then you’ll be pissed next year. Those two idiots, Steve and Damon.
Steve Rhode: Told me to adjust my withholdings.
Damon Day: And now my refund check instead of 5,000 is only 1,000. And I don’t know what happened to the rest of the money. They suck. So at minimum, when you have that moment of clarity and you set up your spending plan and your budget, and we’re talking about automating things, if you’re going to do that, and you’re going to adjust your withholdings. And let’s say that’s going to bring in an extra 300 bucks a month into your check. At minimum, that $300 should be automatically deposited into your savings account as soon as that check comes in, automatic. And then at least you’re getting the money and you’re earning the interest. And as long as you don’t go back in and raid your account, which you’re an adult, you can make decisions. I mean, that is your money. At least now you’re actually earning some interest on your own money rather than giving it to the IRS as an interest-free loan.
Steve Rhode: You know, one place I think is really easy for people to put their money is Acorns.
Damon Day: If you’re going to set up an Acorns account, hit me up first, so I’ll give you my referral link.
Steve Rhode: Yeah. Plus, you can set up an account for you, your kids. You can do IRAs. You can automate everything. You can round up your spending. It can really help you put money away easily.
Damon Day: Yeah, and there’s several high-interest savings accounts out there. If you just do a Google search for high-interest savings, I just found one. And these change all the time, obviously, when rates fluctuate. I just found one at Santander at, at 4%. Acorns right now is at 3.35, which is pretty good.
Steve Rhode: Yeah.
Damon Day: Um, it was actually very good, but, um, Santander is one of the best that I found at, at 4%. There’s a couple other places around four. Um, uh, but a lot of the ones that are at four, like SoFi, they have like a boost and it’s only at 4% for six months. If you meet certain requirements and a whole bunch of BS, but the Santander one is just a straight, Hey, it’s 4%. Um, at the time of this recording, by the time you go there, it might, might be three. You know, things change.
Steve Rhode: Well, that’s what will happen if the Fed lowers interest rates. People always get so excited. You’re like, if the Fed lowers interest rates, it’s going to make my credit cheaper. No, it’ll make your savings account cheaper. Your credit card interest rate’s not going to budge.
Damon Day: Yeah. Yeah. They’re quick to go up, but they’re not quick to come down.
Steve Rhode: Right.
Damon Day: But like right now, like if you go to, like I said, Tanner Bank or something like that or an Acorns and you’re getting three and a half, 4%, most CDs where you’re locking up your money for at least 12 months, like a short-term CD, is barely paying more than 4%.
Steve Rhode: Oh, hell, my bank for a savings account pays .01.
Damon Day: And that begs the question, why is it your bank?
Steve Rhode: Well, it’s not atypical. Savings accounts at banks suck.
Damon Day: I know, which is why you got to do a little research. And if you just Google, you know, high yield savings accounts, there’ll be plenty that you can find that you can set up. And you can keep, you know, if you like your Chase Bank, if you like your Wells Fargo, if you like that, that’s fine. You can keep that. But then you can set up a high yield savings kind of like, you know, link to it. Right. And transfer your savings into something that’s actually going to earn you some money rather than 0.05%, you know, percent or 0.5% or whatever the hell they’re offering you. That doesn’t make any sense. That’s not even keeping up with inflation. I mean, I think the, the acorns checking account alone, just the actual checking account pays over 2% and the acorns checking account. And then the savings, the, the emergency savings is 3.35. It used to be like 3.8, but you know, fed cut the rate. So, you know, banks have to adjust a little bit. But why would you keep your money In an account That you’ve got $10,000 in an account Paying half a percent When you can link it Transfer it to an account that pays you Three and a half or four Again, this is a savings account You’re not going to access the money every day And then if you need the money It might take 24 or 48 hours to get it transferred back That’s no big deal It’s a savings account I agree.
Steve Rhode: Good advice As always All right. So I think we have covered.
Damon Day: Q2 reset. April’s a fresh start. Let’s get on that.
Steve Rhode: April is a fresh start. Squirrel. April is a fresh start. And you know what happens with April is pretty soon people think the tax refund check is coming and that’s going to save them. So it’s heads in the sand again. But then following that Comes summer vacation Again heads in the sand Because people don’t want to postpone That summer vacation Kids out of school All that, So Um So, I was just going to skip that end stuff.
Damon Day: Why do we have an outline for this show? High quality production we have here.
Steve Rhode: Well, people get to see how the sausage is made on this one.
Damon Day: This puts a lot of pressure on me to be funnier.
Steve Rhode: Well, go for it. Go.
Damon Day: Okay.
Steve Rhode: All right.
Damon Day: So the overall theme of what we were trying to do today was, if you’ve already got your refund, chances are you already blew it, right? It is what it is. That’s fine. April’s a new fresh start. It’s a do over. We’re going to start fresh in Q2, but you have to make a plan. If you haven’t got your refund check, please don’t let your plan be. I’m just going to throw what I get at one or two of my credit cards. That is not a plan. It’s not a strategy because chances are next year at this time, it’s going to be the same. My debt is just as much, if not more than it was last year at this time. So I’m just going to throw my tax refund back at this credit card debt and it you just slog along in this debt year after year after year we need to rip the band-aid off remember i was talking about earlier you have to cut the fat we got to get the debt out of your life as quickly as we can or you will be buying pizzas on payments nobody wants to buy pizzas on payments we got to get out of debt.
Steve Rhode: Yeah we got to get.
Damon Day: Your financial life.
Steve Rhode: Restructured because the refund wasn’t the strategy. It never is every year. The strategy is huge. So, like you said, Damon, let’s make Q2 count.
Damon Day: Yeah, the refund is just your time to be able to take a step back and take a breath. That’s what the refund is. Take a breath, figure out a good plan for this little extra money you have. And if that’s the only extra money you have all year, throwing it at a little bit of your debt is not going to fix the problem. We need to get a little bit more drastic with it. So, you know, if you haven’t started yet, today is April 2nd, right? Yeah, today’s April 2nd. This week Make a move Set up a call with me Set up a plan Figure out what we’re going to do Let April be your reset We bombed our New Year’s resolutions Back in January, We don’t have to wait until next January to start again We can start fresh right now.
Steve Rhode: I love it, Damon We’ll have to set up a couple new slogans for you Right? Tastes like affordability Have a kitty cat chitty chat and Damon’s Bust a Move.
Damon Day: What about Pizza on Payments? I like Pizza on Payments.
Steve Rhode: Pizza on Payments.
Damon Day: Unless you want to be making, unless you want to be buying Pizza on Payments, give me a call.
Steve Rhode: All right. Until next week, Damon, I will see you.
Damon Day: Peace.
Frequently Asked Questions
Why doesn't throwing my tax refund at credit card debt work?
Because a one-time payment rarely makes a meaningful dent in balances that have been growing for years. Without a strategy that changes your monthly spending and debt payoff plan, you'll be in the same position next year. The refund is an opportunity to build a plan — not execute a single payment.
Why does Dave Ramsey's advice fail people with ADHD?
Dave Ramsey's baby steps and budgeting methods require sustained working memory, impulse control, and consistent re-engagement over months. These are exactly the cognitive capacities that ADHD disrupts. His advice was designed for a neurotypical brain, and it sets people with ADHD up to feel like failures when the real problem is a mismatch between the tool and the brain.
What actually works for managing debt with ADHD?
Automation. Set up autopay for all bills, route savings automatically to a high-yield account, and remove as many in-the-moment financial decisions as possible. When your brain isn't required to consistently re-engage with boring tasks, the right things happen whether or not you feel motivated.
Can private student loans be discharged in bankruptcy?
Yes, in some cases. A 2023 Duke Law Journal study found that out of 500 bankruptcy cases where people were eligible to discharge private student loans, 499 never tried — because they (and often their attorneys) assumed it wasn't possible. It requires an extra step called an adversary proceeding, and the Brunner test evaluates your hardship. Get a second opinion from a specialist before assuming discharge isn't available to you.
What is the bankruptcy means test and why does timing matter?
The means test determines whether you qualify for Chapter 7 bankruptcy by comparing your income to your state's median. But it uses your income from the previous six months before filing — not your annual salary. If you were just laid off, waiting two or three months before filing can include those zero-income months in the calculation, potentially making you eligible for Chapter 7 instead of a five-year Chapter 13 repayment plan.
Should I adjust my tax withholdings if I get a large refund every year?
Possibly — but only if you have a solid plan for the extra monthly cash. Getting a large refund means you've been giving the IRS an interest-free loan all year. Adjusting withholdings puts more money in each paycheck, but without automatic routing to savings or debt payoff, that money tends to disappear. Make the plan first, then adjust the withholdings.
What should I do with my tax refund if I'm in debt?
Use it as breathing room to build a real strategy, not as a one-time payment. If you're considering bankruptcy, debt settlement, or another resolution, the refund gives you time to consult with someone and make an informed decision. Throwing it at the highest-interest card feels productive but rarely changes the bigger picture.
Claiming money you are owed is one good day. What you do over the following year is what actually changes your position.
In the latest issue (Sep 4): You can stop an IRS interview cold — even after you’ve started answering
I write Your Money Actually most weekdays — what I am watching in debt and money, and the small decisions that compound. It is free, I sell nothing, and I take no money from any company I write about.
