The Anti-Bankruptcy Business and Why Dave Ramsey is Dead Wrong
Every “alternative” to Bankruptcy, like Debt Reduction or Credit Counseling, is trying to sell you a service. They use the untrue scare tactic that “your credit will be ruined” and always pitch Bankruptcy as a last resort, while offering to hook you up with their plan.
One of the more interesting characters who has caught my attention lately is this radio-show, debt-solver character named Dave Ramsey. Like most “gurus,” Ramsey mixes a few valid points in with his own brand of financial freedom, which he is happy to sell you, amongst the many products (including nifty coffee mugs and coupon holders) he hawks on the radio and from his web-site. In fact, the only thing standing in the way of being debt free and having lots of money, according to Dave, is not buying all his materials. Make no mistake, old Dave is ready to sell you your way to financial freedom.
My concern is with Ramsey’s opposition to bankruptcy. Of course, it is in the process of selling people his goods to avoid bankruptcy that Ramsey, like all his kind, makes his money. Ramsey will proudly tell you that he filed for bankruptcy himself, and then later learned how to avoid it, after he got rid of all his own debt.
Ramsey says that something like 80% of all bankruptcies can be avoided and the underlying debt paid off. Maybe he never heard of Michigan, or has never been here.
He advocates getting two jobs, if necessary, to pay off debt! Unfortunately, with major layoffs in the news every week, and with the highest unemployment rate in the country, most people in Michigan would give their right arm for just one job! The clients I see are losing homes because they don’t have enough money coming in to make the mortgage payment, they have suffered wage cutbacks, hours reductions and or one or both spouses losing a job. They are struggling to make car payments, buy food, or just stay afloat, and they have this guy advising them to pick up a second job, like it’s waiting in the email, to get the extra income in order to pay off the high-interest rate credit card debts first.
These hucksters make it sound so easy, and so good.
Ramsey offers nothing by way of any real solutions. How do you work out a plan to double and triple up the high-interest credit card payments, maintaining the minimum on the others, when the usual reason for having so much debt in the first place was a reduction or lack of income? How do people with job losses and medical bills and foreclosure issues formulate such a plan when they can’t even meet their living expenses? THEY DON’T!!!!!!
Instead, they can do what Dave Ramsey did, which is to file for bankruptcy, get out of the debt and start over. Notice Ramsey is one of those who essentially says “do as I say, not as I did.” If you’re willing to give Dave the money he wants for one of his many products, he will give you his secrets, all of which he discovered after he got out of his own debt using bankruptcy. And notice, whatever else Dave tells you, he is, for better or worse, living proof that bankruptcy does not kill your potential.
Airlines, automobile parts suppliers, car companies, and even casinos (yes, the great Donald Trump) use bankruptcy as a means to avoid debt that would otherwise drag them down.
The point here is that when you have debt that you cannot pay, all the planning in the world is not going to create money out of thin air to pay it. The missing link in Ramsey’s plan is money, and for most of us, that means we either win the lottery, or we earn it, as wages. With jobs and wages falling through the floor, getting a second job, or even a first one, that pays enough to have left over money for this kind of pie-in-the-sky brainstorm is nothing more than a pipe dream.
I do agree with Ramsey that not getting into debt is a good thing. After bankruptcy, avoiding debt as much as possible, except with things like car payments and mortgages, is a darn good plan. While we should all live by the rule that one should live within their means, this rule only makes sense when you are not already over-burdened by debt.
For all the concern about psychological well-being, nothing but nothing beats not having the debt collectors hounding you. And if you’re lucky enough to come across that second job, then the money you earn is better spent on stuff you need rather than old debt.
And for as smart as he promotes himself to be, notice that no bank, financial institution or automaker went to Ramsey for advice during the current financial crisis. The big money guys, Chrysler and GM, simply did the bankruptcy and dumped the debt.
Getting rid of Lawsuits, Judgments and Garnishments in Bankruptcy epiq bankruptcy solutions llc letter
As a Michigan Bankruptcy Attorney who handles cases in Macomb, Oakland, Wayne, St. Clair and Sanilac Counties, my office is often called by people literally “freaking out” over being served with Lawsuit papers, or receiving notice that a Judgment has been taken against them, or that a Garnishment has been placed against their wages.
I have good news here: If a person is eligible to file for Bankruptcy, then those proceedings can be stopped dead in their tracks.
Moreover, in many cases, even if a person’s wages have already been garnished, those funds can be recovered.
To understand how powerful the Bankruptcy Laws are, and how they can essentially kill a lawsuit at any stage, it helps to understand a little bit about those laws.
Under the Bankruptcy Laws, known also as the Bankruptcy Code, the moment a person files for Bankruptcy, certain things automatically happen. The most important of those is known as the “Automatic Stay.” The Automatic Stay is a provision of the Bankruptcy Code which essentially freezes all proceedings against the person who filed for Bankruptcy at the instant it’s filed. This means that anything that happens, even 1 second after the Bankruptcy is filed, is essentially considered void.
Therefore, a person who files for Bankruptcy is protected, or kind of “immune” from any Lawsuits, Judgments, Garnishments or other Collection efforts at the very moment their case is filed. This is perhaps the strongest single law on the books. Think of it as a great big hammer that smashes everything to bits.
In a very real way, the Automatic Stay is a kind of legal multi-tool:
- If someone is about to sue you, once the Bankruptcy is filed, they cannot.
- If they have already sued you, and the case is still active, Bankruptcy law requires that the Court where the case is pending close it down, immediately upon notice of the Bankruptcy filing.
- If someone has sued you, and has already obtained a judgment, then the filing of a Bankruptcy essentially “voids” that judgment.
- If someone has begun collecting on a judgment they obtained against you, Bankruptcy Law not only stops any further collection activities, but may also require that the person who obtained the judgment pay you any amount of money back that they took, if the total amount is greater than $600, and was taken within 90 days before the date the Bankruptcy was filed.
Of course, it makes far more sense to file a Bankruptcy before money or property is taken, but the bottom line is that it’s never too late to file for Bankruptcy. Whenever it’s filed, the relief a Bankruptcy brings from having all this debt-related pressure just go away is immeasurable.
