I saw Dave Ramsey, the guru of non-professional advice on getting of debt, with a show entitled "How to avoid bankruptcy". It is striking how horrible his advice is. For a guy who filed bankruptcy himself, got a fresh start, and went on to become a multi-millionaire, you have to wonder who is behind his "Avoid Bankruptcy" campaign.
A nice lady called in with a big problem. She is married with 3 kids, and their household income is $3600 a month net. Her mortgage, utilties, food and other living expenses are over $3000 a month and they have no savings. She has $50,000.00 in credit cards and is paying minimum payments of $3000 a month, and has to use them again to buy food, clothes and gas. So she will never get out of debt unless she files bankruptcy.
What is Dave Ramsey's bogus advice? Stop paying the credit cards, and when they call her, hang up on them unless they will settle each debt for cash! And he told her to stop contributing to her 401K! Unbelievable! Why?
Let's say she has a card with $8000 balance. How is she going to get $4000 to give them? She only has about $500 a month she can squeeze out. It would take her 8 months to save $4000.00. And if they did settle for 50%, they would send her a 1099 for the $4000 they forgave, which she would have to pay taxes on. Debt forgiven is taxable! Of course Dave Ramsey didn't say that.
And in the meantime, the other $42,000 in creditors aren't going to wait 8 months. They will call her and her husband at home and work, sue her, get a judgment, and each judgment will attach to her house. Not only that, they can garnish their wages, and her bank account.
So Dave Ramsey's advice is so totally wrong as to raise serious questions as to how Fox News lets him broadcast such nonsense.
Of course, Dave won't make his millions if folks like this family file bankruptcy and keep their house car and pension, and get out of debt, since they won't have to worry about bills, and won't have to listen to him. Dave is not a bankruptcy attorney, he can't give legal advice, and what advice he gives is weird. These folks can file Chapter 7 for less than $2000, have no debt, keep their house car and pension, be free from all credit harassment, and THERE IS NO TAX DUE ON DEBT FORGIVEN IN BANKRUPTCY! Shame on you Dave Ramsey for telling this lady to stiff her creditors, give her pension contribution to them, and be afraid of bankruptcy. President Obama is a trained Harvard lawyer and told GM to file bankruptcy to survive. Why is Dave Ramsey spreading fear of bankruptcy relief?