When Facing Foreclosure, Have A Plan!

The other day I was watching television and Dave Ramsey, the financial guru, was on. The news reporter asked what should people be doing to protect their finances in this era of uncertainty.

Dave Ramsey‘s response was generic. He stated that individuals should never cash out their 401(k)s unless they were facing foreclosure or bankruptcy. In other words, he was suggesting liquidating your 401(k) to avoid a bankruptcy filing. Mr. Ramsey is clearly anti-bankruptcy, even though he filed bankruptcy several years ago.

Before I go any further, I think I should clearly state that Dave Ramsey is a very intelligent gentleman. He has built a very large business giving financial advice to those who need it. His organization gives advice to tens of thousands of people, maybe more, on a daily basis.

Here’s the problem, when normal individuals hear Dave Ramsey‘s advice, they are going to listen. The problem here is that the advice was generic, and I take issue with that. His advice may have been fine for some people but not all.

In Florida, your 401(k) is protected from creditor’s claims. Your home and all the equity in it is also protected from creditors' claims, except the mortgage holder. If you don’t pay the mortgage each month, the mortgage holder can foreclose. So, in a financial pinch, like the kind most people are facing today, why would you not consider filing bankruptcy and protecting your 401(k) and your home.

If you think about it for one moment, it makes sense to have a plan. If a person is facing foreclosure, it means they have fallen behind on their house payment. They have also probably fallen behind on other obligations as well. Here is where it would be beneficial to file a Chapter 7 or Chapter 13 to get your finances under control, and then, and only then would you look to the 401(k) plan to bring the house current, if necessary. In other words, individuals should consider using the bankruptcy process to further themselves financially. It’s purely strategic. It won’t work for everybody, but for those who do use the bankruptcy court as a financial strategy, they come out much stronger financially and are on a path to reach their financial goals.

In the past, I have seen people who took Mr. Ramsey’s advice, and it cost them a lot of money that they didn’t have to lose.

I guess as a person who helps people with their financial problems, I don’t like the generic approach to giving financial advice. I prefer helping people on an individual basis with their problems.

If you are experiencing financial problems and would like to have a strategic plan, rather than generic advice given a soundbite on television, please feel free to reach out to the Dellutri Law Group for a complimentary strategic bankruptcy consultation.