Recently I have had numerous clients express reservation regarding filing of bankruptcy because  Dave Ramsey has expressed his dislike of the process. Essentially, Ramsey claims that bankruptcy is a poor solution to financial problems. I am sure that he has “helped” numerous individuals out of debt. The problem is Mr. Ramsey employs a one size fits all approach that says bankruptcy is bad. Dave Ramsey recommends rather than bankruptcy that debtors pay him. To put it simply Mr. Ramsey is for profit and therefore has a reason to not recommend bankruptcy. He recommend his Total Money Makeover which cost money and is not guaranteed to succeed. Bias aside, Dave Ramsey admits that he himself has been through the bankruptcy but claims that it will rune your credit and leave psychological scars. He certainly seems to be doing well now, earning income “helping” people buy his debt elimination product.

Facts are facts most individuals who file bankruptcy have poor credit in the first place. The filing of bankruptcy doesn’t make any material difference when the credit score is in the 500 range. What bankruptcy will allow, contrary to what Dave Ramsey says, is for individuals to repair their credit quickly instead of dragging out the process for years. Bankruptcy will also ensure that there is no interest rate, no late fees and no over the limit fees. Instead, the large sums of money used each month for the credit card treadmill can be used by to fund retirement, pay for children’s college expenses or to pay on houses and cars. Dave Ramsey’s one size fits all approach also does not tell individuals that creditors will often reissue credit shortly after a bankruptcy because creditors know that the individual would not be able to file another bankruptcy for eight years and the income to debt ratio is fixed.

I don’t disagree with Dave Ramsey on every point. I always recommend that our clients file bankruptcy if appropriate and then fix the issues that caused them to file so they never have to file again. By filing bankruptcy rather than struggling for year you fix the immediate problem of creditor collections then you can fix the long term problem of proper financial management.