11/21/2005

Advice from Nashville's leading Financial Aid Advisor Dave Ramsey

 
Dave Says
By Dave Ramsey
Author of:
Financial Peace and
The Total Money Makeover

"When is it okay to file bankruptcy?"


Dear Dave,

I’m sitting down with my sister this weekend to analyze her financial situation, and I suspect it’s not very good. At what point should you file bankruptcy?

Jamie in MS

Dear Jamie –

Almost never. Ninety-something percent of bankruptcies that are filed don’t have to be filed. I tell people to file bankruptcy about as often as I tell them to file for divorce – I don’t. There are always situations where good people get into bad things, but I think a lot of divorces are the result of people just giving up and I think most bankruptcies are, too.

Even if you don’t have any numbers yet, what you do have is a sister who is obviously overwhelmed and asking for help. When you sit down with her, get her to draw back from the situation and not be emotional. Tell her to sell the car, take an extra job, live on a budget and have a garage sale. Make sure she takes care of necessities like food, shelter, clothing, transportation and utilities. She may take a few dings on her credit along the way, but you can still map out a plan where she’s not only caught up but completely debt-free in about two years.

She’s probably not bankrupt, but she’s out of control and has lost hope. It may take a little while to clean up this mess, but you should never file bankruptcy on something you can clean up in two years. Never! Walk her through it, Jamie. Most of all she needs a plan and the hope that goes with having one in place.

- Dave

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