Dave Ramsey tells homeless, unemployed Ohio man with $14K debt that there’s no point declaring bankruptcy. Why his money problems are just symptoms

Toby asked Dave Ramsey and Jade Warshaw if declaring bankruptcy was a “smart move.”

“Toby, you’re not bankrupt,” Ramsey responded. “You’re broke, homeless and don’t have a job.” (1)

Ramsey said debt was simply a symptom of “all the other crap that’s going on in your life — not keeping a job, DUIs and all this other stuff.”

He and Warshaw urged Toby to find a steady job to get his life back on track. Toby asked them to help him with his lack of motivation.

“The problem with your money is the guy in your mirror, and he’s difficult,” Ramsey said. “Controlling the guy in our mirror is every one of us. It’s the thing we struggle with the most.”

Here’s what Ramsey recommended Toby do instead of declaring bankruptcy.

Ramsey recommends support to get back on track

He told Toby that may be able to pay off his car loan some day but not to worry about it too much as there’s nothing debt collectors can chase down; the car’s broken down.

“If they come find you, they can’t take nothing,” Ramsey said. “You’re what they call judgment-proof.”

Filing for bankruptcy can be helpful if you’re inundated with collection calls or are being sued for payment, but it’s important to note that even if you file for bankruptcy, the court may not grant you one. (2)

A Chapter 7 bankruptcy allows individuals to forgo paying debt if they can prove their assets are not reasonably sufficient to satisfy their creditors. Chapter 13 Bankruptcy, also called a wage earner’s plan, enables individuals with a regular income to repay all or part of their debts over a period of three to five years.

Most financial advisors like Ramsey say to stay away from filing for bankruptcy if possible. There are better alternatives, like out-of-court agreements with creditors or debt counseling services and debt consolidation plans.

That’s because the long-term effects of bankruptcy are serious: losing your assets and not being able to take out a loan or mortgage for seven years.

It can have a serious impact on your lifestyle and financial future, so it’s critical to work with a financial advisor if you’re considering this option.

Ramsey said what Toby needs — more than financial support — is moral support. He recommended that Toby seek out mentors, for example, at his local church, to help him work toward more stability in his life.

Toby responded that he did have mentors who were already helping with his own self-reflection.

How our emotions influence our financial decisions

Many young people like Toby are struggling to get ahead. In a recent Bank of America survey, 51% of Gen Z said the high cost of living is a barrier to their financial success (3).

Some turn to unhealthy behaviors to feel temporary relief, like retail therapy, ignoring financial responsibilities or doom scrolling (4).