There's one name that I hope my clients never forget.
No, not mine -- Dave Ramsey's.
To say I'm a big believer in Dave Ramsey and his "advanced common sense" approach is an understatement. He's awesome. He's right. And he's freeing people from the bondage of debt on a daily basis.
So tonight I finally dragged my wife to a local Financial Peace University class -- a 13 session DVD class that lays out the Ramsey Financial Peace plan. Very exciting!
Now, some might wonder about a bankruptcy lawyer who promotes Dave Ramsey. Isn't that like a field-mouse running a red-tailed hawk fan club? A seal who promotes killer whale worship? A rabbit being a hunting dog groupie?
Nah, actually Ramsey and I both agree on this point: bankruptcy is very, very painful. And it is not the cure-all to debt problems. Let me repeat that last point:
BANKRUPTCY IS NOT A CURE FOR DEBT PROBLEMS
Shocking? Well, maybe. But years of watching bankruptcy clients come and go has led me to the understanding that something important is missing. Something is not working the way it should.
Why do I say that? Why wouldn't eliminating your unsecured debt be a huge head-start to getting your life in financial shape?
Well, because as Ramsey says, "Personal Finance is about behavior." Of course if you file a Chapter 7 bankruptcy, you CAN get out of debt. Maybe even quicker than Ramsey's famed Debt Snowball technique. (MAYBE - see article comments. fbc)
So why doesn't it work? Why don't my Chapter 7 clients find that bankruptcy is a life-changing experience -- in a good way, I mean?
Because they don't change the behaviors that brought them to me in the first place. If they file bankruptcy, they don't have to budget, they don't have to work with their spouse, and they don't have to learn to save for emergencies.
So when they take the short-cut of Chapter 7, they bypass a lot of important lessons and habits they need to instill to ensure success.
Now, none of this is to say that bankruptcy is unnecessary. Nor did I say or imply anywhere that people who are filing bankruptcy are "deadbeats" or somehow unsavory. (Quite the contrary -- my experience shows that most people would gladly cutoff their right arms if they could avoid bankruptcy.) They just don't see how that is possible. And they wait too long to take action. Many of them are already being sued by creditors or even having their paychecks garnished. These are NOT deadbeats. They're people who've made a couple of unwise decisions with money, and gotten trapped.
No - they're not deadbeats; they're good people with families and homes and dreams. They are professionals and housewives, mothers and fathers, blue collar and white collar. They are university educated, many of them. They're not stupid. They're not crooked. (Something I can't say about insurance companies and some credit card banks, by the way, many of whom have "lie, cheat, and steal" as a part of their business plans.) No, my clients aren't the bad-guys. They're just people who don't know how to find Financial Peace.
I'm going to be blogging about my experiences in Dave Ramsey's Financial Peace University class over the summer. Please come along and follow me as I dive in.
If you need some Financial Peace; if you're one of those good solid people who have nonetheless found themselves in extreme financial distress -- give me a call. I'll try to find a way out of your predicament and get you set back on the road to financial strength. I'll also try to map a way out that doesn't include bankruptcy. But sometimes, bankruptcy is all there is left. In that case, at least you'll know that you didn't really have another choice and that you did all you could to avoid it.
Call me, I can help.
In the meantime, check out Dave Ramsey's site: http://www.daveramsey.com ; go here for a link to his Financial Peace University intro: here
Ben Callicoat
918 582-6131
Ben,
ReplyDeleteThank you for sharing your thoughts and experiences with Dave Ramsey. I haven't yet taken the Financial Peace University course although I plan on doing so in the near future. I have read several of Dave's books and occasionally listen to his radio show. Dave is extremely knowledgeable regarding personal finances and is making a great impact in the lives of people who are burdened by debt. For that I applaud him.
However, as a bankruptcy attorney, I probably am biased, but I believe that Dave goes beyond just discouraging bankruptcy. Even though he will say that he doesn't tell a person never to file bankruptcy, if you listen to him long enough, that is really the essence of what he says.
As a bankruptcy lawyer, I used to advise people that bankruptcy should be a last resort. Well I've changed my tune after seeing many, many people delay filing bankruptcy for so long while pursuing other remedies that they ended up in a much worse situation, both emotionally and financially, than if they had filed bankruptcy sooner.
Oftentimes these good people are led to believe that depleting their retirement savings or taking out a second mortgage in order to pay off their unsecured debt is a wiser financial option than filing bankruptcy. That's because of this mentality that says bankruptcy must be a last resort.
While using retirement savings or borrowing against equity in a home may work well occasionally, for many people these choices only compound their financial woes by dumping them out of the frying pan and directly into the fire. By borrowing against the equity in their home, they haven't gotten rid of the debt, they've just put their home at risk. And by depleting their savings, yes they're out of debt but now their golden years won't be so golden.
I now see bankruptcy not as a last resort, but as a financial tool to be considered along with all of the other options that Dave considers to be more legitimate means of dealing with debt. As you know, Dave himself filed bankruptcy years ago. And while he talks about how badly filing bankruptcy hurt him, it certainly allowed him to extricate himself from his overwhelming debt and get a fresh financial start. And just look at how successful he has become.
Dave Ramsey is the poster child for the fact that filing bankruptcy does not equal financial suicide. People need to understand that their lives will not end if they file bankruptcy. Rather, bankruptcy is a legitimate method for getting a fresh start, for regaining financial freedom and having the opportunity to become a productive member of society. Of course moving forward and becoming financially strong will require people who have filed bankruptcy to make good financial decisions and to exercise fiscal discipline, just like Dave Ramsey did.
Dan Nunley
Broken Arrow, OK
http://www.oklahoma-bankruptcy-attorney.com
Dan - great comments! There is a lot to say for your position, and in fact, I regularly struggle with the same conundrum, i.e., whether to recommend a "quick-strike" one-fell swoop, or whether to counsel a person to get busy and avoid bankruptcy.
ReplyDeleteFact is, I had a client in within the last 10 days, who really and sincerely was wanting to avoid bankruptcy. And I support her in that goal. But I also had to lay out precisely the same option of filing bankruptcy vs. not filing bankruptcy, and how the not-filing option could lead to years of struggles, whereas filing would eliminate the debt in a matter of a few months.
This is a serious consideration for those facing debt -- especially where their income is marginal.
On the other hand, one of Ramsey's key messages is that personal finance is more than just math -- it is about behavior and human psychology. As we heard last night (and I've heard many times before) "doing the same thing over and over again and expecting different results is the definition of insanity." And that is exactly what I see many of my bankruptcy clients doing - sure, they discharge their unsecured debt, but they don't do anything to change their habits and behaviors to chart a course to success.
That's what Ramsey's about: changing behaviors so that people can learn to win with money.
Your points are well taken, and I cannot disagree, except to say that people who follow Ramsey's advice and use his methods to dump debt and build savings, succeed.
Thanks for your excellent comments and perspective.
Ben Callicoat
918 582-6131
fbcallicoat@gmail.com
PS: As Dan pointed out above, Ramsey freely admits that his anti-bankruptcy stance is borne out of his personal experience in bankruptcy. In fact, he makes this clear from the get-go.
ReplyDeleteI recently criticized a Chicago lawyer's snipe at Dave Ramsey's bankruptcy experience when that lawyer made it seem like Ramsey was somehow hypocritical. Of course, he is not. He's openly telling people "Look - I've made this mistake myself and I'm warning you about it so that you don't have to experience the same thing."
There's nothing hypocritical about that; it would only be hypocritical if Ramsey were to take that option while he advocates against it. Ramsey's bankruptcy occurred many years before he ever thought about teaching people about money. In fact, his ministry was borne out of the pain that came from his bankruptcy.
Finally, I'm pretty sure that Ramsey's response would be that yes, he definitely is anti-bankruptcy when bankruptcy does not correct the problem. And if you follow his advice -- which prominently includes temporarily increasing your income through second jobs in order to eliminate debt -- you can erase that same unsecured debt that you will in a Ch. 7 bankruptcy. Regular listeners to Ramsey's program know that his tagline response to "how are you?" is "Better than I deserve" and that that same tagline is showing up among people who take second jobs as a kind of Dave Ramsey "secret passphrase".
Another point in favor of Ramsey: in addition to counseling people to eliminate debt, he also counsels them to find their true calling so that they can maximize their income. Find something you're passionate about, and do THAT for a living. Not only will you be much happier in your work, you will likely increase your income as well. FPU has an entire lesson on this subject.
Thanks again to Dan Nunley for the dialog. Dan is an excellent bankruptcy attorney and a good man.
Ben Callicoat
fbcallicoat@gmail.com
Hey Ben!
ReplyDeleteSaw you were looking for me through LinkIN. Yea, I finally checked my e-mail at boomersooner.com. LOL
Best way to reach me is:
timbeauchamp@yahoo.com
918-260-3308
I've been busy with some other stuff, and hadn't been checking my boomersooner.com account.