daveramsey “Hate” may be a strong word, and it almost always is, so let’s change it to “dislike” or “disagree with” Dave Ramsey.  If you do not know who Dave Ramsey is, you might not be interested in this post, but you can read his biography here.  In short, he is a “financial planning guru” (my term) who writes books and materials and conducts seminars on how to get out of debt.  There is nothing new or novel about his teachings, as it is based on cutting the budget (sometimes drastically) and starting to knock out debts one by one.  I could explain it further, but Dave has a podcast and if you listen for 15-20 minutes you will probably get the picture.

Back to the question – why do Bankruptcy lawyers “dislike” Dave Ramsey.  Simple – because he is anti-bankruptcy.  Very anti-bankruptcy.  His favorite term is “rice and bean, beans and rice” and he applies it to groceries as well as houses, vehicles, entertainment and everything else.  It means to spend the bare minimum on absolute necessities and using all available funds to pay down debt.  That means a 12 year old car that runs well.  Selling a house that is more than you need and can afford and renting instead.  You get the picture.  Here are the usual major objections to Ramsey’s programs in general (as opposed to disagreeing with specific advice):

  1. Unlike Bankruptcy, his program requires a lot of time (usually years), people follow a very strict budget during that time, and that they deprive themselves of things like entertainment and fun unless it is free.  On the other hand, Bankruptcy (especially Chapter 7), is often an “in and out” process that gets rid of all that debt in about 4 months.  This is not a legitimate objection to Dave Ramsey or his program. It is an objection and disagreement with another method of paying paying off debt that, by the way, is sometimes better financially in the long run.  It also means we do not get your case and the fees to go with it.  In addition, Chapter 13 often means a budget that is just as lean as what Ramsey would preach.   Bankruptcy is one way to get rid of debt. There are others. As lawyers, are we laying out the options for you or are we dismissing everything other than the program we are selling?
  2. “Dave Ramsey is a hypocrite” who crusades against Bankruptcy, but he filed for Bankruptcy himself.  Yes, he did.  Similarly, counselors in drug and alcohol rehab programs, abuse centers, hospitals and other organizations (and businesses) are former addicts or have suffered through the same things.  Ramsey is very upfront about his financial history and stupid choices.  This objection is about as legitimate as the “celebrities who have filed for Bankruptcy” so if someone uses this, you should question the motives.
  3. Ramsey ignores real life emergencies like losing a home or vehicle that gets you to work, garnishments, and not being able to feed the family.  Yes and no.  He certainly does not ignore them; he just has a harsh response in come cases (including letting the house go).  Again, it gets back to: 1) what are all your options, 2) what are the pros and cons, 3) which of them are realistically possible, and 4) “which one do I want to try?”  If we cannot answer all of these questions (and jump in on the 4th), and only have a one-track mind in every case that Bankruptcy is the only option, then find another lawyer or two.  I often see responses on various forums on which people ask about Bankruptcy for, let’s say, $10,000 in credit card debt with no “emergencies” such as lawsuits.  I am disappointed that a few lawyers think of nothing but Bankruptcy for a debt that MIGHT be paid off in a few months or a year with a part time job or cutting the budget.  One recent response to this very question was “If you want to file for Bankruptcy, file for Bankruptcy!”  That is not a response from an ethical lawyer and counselor who is interested in the best interests of his clients (or prospective clients).
  4. “I disagree with what Ramsey has to say about…whatever!”  Great, so do I! I also disagree with other lawyers, trustees, clients, judges, Congress and many Bankruptcy laws.  That comes with the job and with life. I do not have to agree with everything someone says in order to find value in them.
  5. “Dave Ramsey is telling people to cut everything from their budget because they are in deep debt but he charges $20 for his books!”   This also makes no sense.  Ramsey is not working for free and he does not pretend to be.  Know who else is not working for free? Bankruptcy lawyers and others who object to Ramsey or other advisers who have different opinions.

OK, Scott, where do you stand as a Bankruptcy lawyer?  Easy – Ramsey’s plan and Bankruptcy are legitimate options and it depends on the specific situation of every person or family.  I have been a financial counselor at my church for many years, and part of the rules are that I cannot recommend Bankruptcy (if they want or need that, they can see a lawyer).  Many people, especially those who have not budgeted well or controlled their expenses, simply need budgeting advice and better habits.  A few people were at risk of losing their cars, and we have had a donated used car to give them (rather than wasting money on a car payment or two, which is gone when they miss the next payment).  Some people just need to see a Bankruptcy lawyer because they have lawsuits, garnishments that effect their ability to even buy “beans and rice,” or other real emergencies.  The bottom line is to review all of the viable options.  If you can spend $20 on a book after reading summaries and reviews, then do it.  Better yet, read Ramsey’s website and listen to his podast for free.  If you think Bankruptcy is a viable option, at least see a lawyer.  It will be free as well.

As an aside, Dave Ramsey also has products and seminars for Bankruptcy lawyers.  Unfortunately, when I tried to get more information about these programs I was basically told that I could only get the information if I sat through a telemarketing sales pitch from their sales staff.  I was a little surprised and disappointed that Dave Ramsey would use sales tactics usually used by the companies he claims to abhor.