My Girlfriend Is Considering a Debt Relief Company

Summary

Summary of "My Girlfriend Is Considering a Debt Relief Company" - The Ramsey Show Highlights

Podcast Information:

• Title: The Ramsey Show Highlights
• Host: Ramsey Network
• Description: A concise, daily dose of life and financial advice delivered in under ten minutes by experts such as Dave Ramsey, Ken Coleman, Rachel Cruze, Dr. John Delony, George Kamel, and Jade Warshaw. Available seven days a week.
• Episode: My Girlfriend Is Considering a Debt Relief Company
• Release Date: January 4, 2025

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Introduction

In the January 4, 2025 episode of "The Ramsey Show Highlights," Dave Ramsey addresses a caller's predicament involving his girlfriend's consideration of enrolling in a debt relief company to manage her substantial credit card debt. The episode delves into the dangers of such companies, contrasts them with more sustainable financial strategies, and offers actionable advice to navigate debt effectively.

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Caller’s Financial Situation

The caller, navigating between Baby Step One (saving a $1,000 emergency fund) and Baby Step Two (paying off all non-mortgage debt), shares his struggles with financial instability:

• Current Status: Achieving progress but facing setbacks that require rebuilding financial stability.
• Girlfriend’s Debt: She has accumulated $21,000 in credit card debt.
• Debt Relief Offer: An accredited debt relief company proposes a payment plan of $342 per month for 48 months, totaling $16,400, to settle the debt.

Caller’s Concern:

"She has $21,000 in credit card debt. They offered us a payment of $342 a month for 48 months. That's only $16,400. I don't understand how this could work, okay?"
[00:10 – 00:48]

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Dave Ramsey’s Analysis of Debt Relief Companies

Dave Ramsey vehemently advises against using debt relief companies, equating their impact to that of filing for bankruptcy. He elucidates the detrimental effects on credit and the overall financial health of individuals:

How Debt Relief Companies Operate

• Payment Cessation: Upon signing up, the company halts all existing debt payments.
• Default Consequences: Credit cards go into default, leading creditors to settle for reduced amounts.
• Credit Impact: Settling debts through these companies severely damages credit scores, similar to Chapter 13 bankruptcy but without the legal protections.

Key Quote:

"Because it's the same as filing bankruptcy. It's going to destroy her credit."
[00:48]

Long-Term Financial Damage

• Credit Damage: The approach results in significant credit deterioration, making future financial endeavors challenging.
• Extended Debt Period: Proposes a prolonged debt repayment period (48 months) compared to aggressive payoff strategies.
• Alternative Comparison: Charging similar credit destruction as Chapter 13 bankruptcy but without beneficial legal structures.

Key Quote:

"That's like saying, I'm going to jail... I don't want to live like that. I want to get back."
[04:35]

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Alternative Strategies for Debt Management

Instead of relying on debt relief companies, Ramsey proposes robust and sustainable financial strategies to eliminate debt swiftly and preserve credit integrity.

1. Enroll in Financial Peace University (FPU)

• Offer: Ramsey offers the caller and his girlfriend access to FPU, which provides comprehensive financial education.
• Separate Accounts: Advises maintaining separate financial accounts until marriage to ensure clear budgeting.

Key Quote:

"I'll give you Financial Peace University and every dollar plus for both of you."
[03:05]

2. Implement a Strict Budget

• Detailed Budgeting: Create an exhaustive budget to track and control every dollar spent.
• Extreme Frugality: Advocates living on minimal expenses—"beans and rice"—eliminating non-essential spending like dining out and vacations.

Key Quote:

"Don't spend any money on anything. Live on beans and rice."
[04:21]

3. Increase Income Streams

• Caller’s Potential: Encourages taking on additional jobs to accelerate debt repayment.
• Girlfriend’s Opportunities: Suggests leveraging her teaching skills to offer tutoring services, potentially earning $30 to $50 an hour.

Key Quote:

"If she has a teaching degree... she can do tutoring and make more than Amazon Flex."
[04:22]

4. Aggressive Debt Repayment

• Goal Setting: Strive to generate significant extra income (e.g., $1,700 monthly) to expedite debt elimination.
• Side Ventures: Explore opportunities such as tutoring or child care to boost earnings without heavily impacting existing commitments.

Key Quote:

"The goal needs to be if you can find an extra... 1700 extra dollars."
[05:38]

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Co-host’s Input and Discussion

The co-host reinforces Ramsey’s advice, emphasizing the importance of finding feasible ways to increase income and adhere to strict budgeting. They discuss practical methods to achieve the caller’s financial goals without resorting to harmful debt relief schemes.

Key Quote:

"Is it Amazon Flex? Yeah. Is it tutoring that pays it off in one year?"
[05:50]

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Final Recommendations and Conclusion

Dave Ramsey concludes by reiterating his strong stance against debt relief companies, highlighting their questionable practices and the long-term financial harm they cause. He underscores the effectiveness of disciplined budgeting, increased income, and educational resources for attaining financial freedom.

Summary of Advice:

• Avoid Debt Relief Companies: They offer misleading solutions that ultimately harm credit and prolong debt.
• Adopt Proven Financial Strategies: Utilize budgeting, income enhancement, and educational programs like FPU to manage and eliminate debt.
• Maintain Financial Responsibility: Encourage personal accountability and proactive financial management to ensure lasting financial health.

Key Quote:

"We do not recommend them at all."
[05:43]

Final Thoughts: Ramsey emphasizes that while the path of strict budgeting and increased income may be challenging, it is far more effective and sustainable compared to the deceptive practices of debt relief companies. This approach promises not only debt elimination but also the preservation and improvement of one’s credit and overall financial well-being.

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Notable Quotes with Timestamps

• [00:48] Dave Ramsey: "Because it's the same as filing bankruptcy. It's going to destroy her credit."
• [04:21] Dave Ramsey: "Don't spend any money on anything. Live on beans and rice."
• [04:22] Dave Ramsey: "If she can get some students from the local elementary... she can do tutoring and make more than Amazon Flex."
• [05:38] Co-host: "The goal needs to be if you can find an extra... 1700 extra dollars."
• [05:43] Dave Ramsey: "We do not recommend them at all."

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Final Takeaway

The episode serves as a critical examination of debt relief companies, illustrating their potential to exacerbate financial woes rather than alleviate them. By advocating for disciplined budgeting, income diversification, and financial education, Dave Ramsey provides listeners with practical tools to reclaim their financial stability and achieve long-term prosperity.

Transcript

[Dave Ramsey]

Brought to you by why refi refinance your defaulted private student loans [e-mail] Ramsey.

[Caller]

Okay, make a long story short, I'm in between baby step one and baby step two. You know, things going good stuff, stuff breaks. Spend my thousand dollars. Gotta rebuild. Baby step one. I got my girlfriend, she's kind of starting to listen to you, too. We want to be married, have a family. She has $21,000 in credit card debt. She found this company, accredited debt relief. They offered us a payment of $342 a month for 48 months. That's to pay off the credit cards. The problem is that's only $16,400. I don't understand how this could work, okay?

[Dave Ramsey]

Because it's the same as filing bankruptcy. It's going to destroy her credit. Here's the way they work. Stay away from them. Stay away from them. But here's why, okay? The way they work is when you sign up with them, they take over all of your payments. And the first thing they do is they stop making any payments. And they let all the credit cards go into default if they're not there already. And so they go into default. And the credit card companies then will settle a bad debt. Now, she will be in collections on every one of them, and then they'll settle the bad debt for a lesser amount than is owed and set up payments on that. And that's how they know that they can get you a $16,000 deal. By the way, if you did this yourself and just quit paying for a year, which I don't recommend, same thing would happen. Then you can call them and settle for probably a quarter on the dollar. So you probably settle all this for five or six thousand bucks. But that is also not paying your bill when you're able to, number one. Number two, you've completely destroyed your credit. I mean, nasty, bad, nasty. You got a bunch of outstanding bad debt at that point. And that's the way these people work. And it basically does the same thing to your credit as filing chapter 13 bankruptcy does do. You can do the same thing with Chapter 13 bankruptcy. You can file with Chapter 13 bankruptcy. If you qualify for the bankruptcy under guidelines, then you can pay a percentage. Not 100%, but you could pay. In this case, you said 16 out of 21, right? Yeah, yeah, you could pay. So you could pay 75 cents on the dollar. You could agree to pay 75% to my unsecured creditors. In my chapter 13. That's not 48 months, that's 60 months. But they could do the exact same thing there. And it'll do the exact same thing to her credit, only technically she's filed for bankruptcy. And the other one, she didn't technically file for bankruptcy, but it does the same amount of damage, if not more, to your reputation and to the process. Plus you're screwed. You're in debt $21,000 for 48 for four years when you could have paid it off by next Christmas working five jobs. Yeah.

[Co-host]

Why can't you just pay it off? Why can't you just work more and pay it off? Tell us more about that. What's the income?

[Caller]

I work for the railroad. I'm on 12 right now, which is legally the most I can work. She's a teacher and she's doing. Starting to do Amazon Flex, but she has a daughter, love to death. What's she teaching? The director of bunch of different, like, daycares. She's a. She used to be a daycare teacher, but she's now like the director of a bunch of those. She makes about 55, 000 a year.

[Dave Ramsey]

Okay. All right, now instead of doing that, now that I've explained to you and answered your question what it does, I'll give you a suggestion rather than doing that, okay? And what I'll do is I'm going to give you Financial Peace University and every dollar plus for both of you. She's going to have her account. You're going to have your account because you're not married, okay? And I want both of you to get on a detailed type budget. Don't spend any money on anything. Live on beans and rice. No eating out, no vacations and working extra. If she has a teaching degree and a talent in a particular subject like math or English, she can do tutoring and make more than Amazon Flex.

[Caller]

Okay.

[Dave Ramsey]

If she can get some students from the local elementary or local junior high or whatever, and she teaches math in the afternoons or the math in the evenings after she gets home. I mean, you can make 30 to $50 an hour doing that.

[Co-host]

Yeah. Child care too.

[Dave Ramsey]

And your kids sit in the other room while you're doing this. They come to your house.

[Caller]

That's a great idea.

[Dave Ramsey]

Yeah. I've got a friend that's a reading specialist that makes bank while her kids sit in the other room and on the side. And I mean, it's serious money there because they got reading problems. And man, she's. Wow, it's really cool stuff. So anyway, yeah, that's what I would add to this and say, all right. We're going to increase our income. We're going to tighten down everything. We're going to have a new thought. We're going to get all of these credit cards tonight and have plastic surgery, and we're going to pay them at 100%. We're going to pay them so fast that they're in our rearview mirror and we get a life. But 48 months, man, that's like ridiculous. That's like saying, I'm going to jail. You get to go to jail for four years and you barely. Gears get to, you know, you bring the food and slide it under the bars, you know, no, thank you. I don't want to live like that. I want to get. Oh, geez. No, man.

[Co-host]

The goal needs to be if you can find an extra. If you can make a goal that we're going to make, or she's going to make 1700 extra dollars. Find it every single month. What does it look like? Is it Amazon Flex?

[Dave Ramsey]

Is it tutoring that pays it off in one year?

[Co-host]

Yeah. Is it child care?

[Dave Ramsey]

And is it. Is it a cut in the budget? She makes 55 already.

[Co-host]

Yeah, yeah.

[Dave Ramsey]

So, yeah, that's the kind of stuff we're doing, Dan. So we're going to help you with that. It's the hard way, but it's the fast way. It's deep sacrifice, but it's in your rearview mirror. And you get to have a great life on the other side of it versus signing up for a long slug through the mud. That's what we're doing. I don't. I'll. And at the end of it, at the end of the story, you're still screwed because you just completely destroyed everything as far as credit goes. So she's probably gonna have some dings on her credit. Probably already does, but nothing like what you'd be signing up for if you go to those comp type of a company. So we do not recommend them at all. Hang on the line. The team will pick up and we will get you signed up for Financial Peace University. Get her signed up. You guys, you can go through the class together, but you need your own separate budgets because you're not married yet and you live. You keep your finances separate until you're married. So. Good question, sir. I appreciate you checking on her behalf. Wow, those things are. You see them on cable TV and man, there's a couple of them have been fined like 400. I mean, one of them got fined, like, it can't be 400 million. Was that the fine? There's Some ridiculous one that Tom Selleck endorsed. And the Federal Trade Commission hammered them with fines a couple of years ago because they just. It's just a scummy side of the world.

[Co-host]

Yeah, it's scummy. And I don't. I don't like situations where you take control from you and give it to someone else to do things on your behalf.

[Dave Ramsey]

And what they're doing is acting like I didn't pay my bill so that they can get a discount.

[Co-host]

Yeah.

[Dave Ramsey]

I mean that. In trashing my stuff in the meantime.

[Co-host]

But we're.

[Dave Ramsey]

We're in the. We're in the debt relief business, just like Dave Ramsey. No, you're not. It's not. Not even. Not even close. Not even close to the same thing. So you stay away from those things. And they call themselves also relief. Debt consolidation.

[Co-host]

Yeah.

[Dave Ramsey]

And it's not debt consolidation at all. You're not consolidating debt. Consolidating debts. When you get one debt and pay off all the others with the one debt, or you don't pay it off, you move it to the one debt. But that's like a home equity loan. That's debt consolidation. But not paying them and you paying these goobers one payment. That's not consolidation at all. And it's really not debt relief.

[Co-host]

No, it's not relief.

[Dave Ramsey]

It's. Well, at the end, I guess it is in one sense, but wonder what. The percentage of people that completed is probably pretty low.

[Co-host]

That's a good question. That'd be interesting to look at.

[Dave Ramsey]

Yeah. You don't finish it, you're really screwed. Why? Refi Refinances delinquent private student loans for struggling borrowers. Learn [e-mail] Ramsey.