Behavior Matters More Than Math

**Dave Ramsey** (0:30)
I'm your host, Rachel Cruze, Ramsey personality number one best-selling author, co-host of the Smart Money Happy Hour. I'm Ramsey Networks, and my daughter is my co-host today. Open phones at 888-825-5225.
Andy's in Indianapolis. Hi, Andy, how are you?

**Andy** (0:47)
Good, how are you?

**Dave Ramsey** (0:48)
Better than I deserve. What's up?

**Andy** (0:51)
Yeah, well, I'm 50 years old, married, with two kids. I'm just getting one off to college here just now, and we're in a situation where, leading into last year, had corporate buyouts cap my pay and really cut my pay significantly. And in the process of trying to make up that income, my wife became severely ill and we're heading towards disability. So she is definitely disabled now. We're looking at, basically, she should have been on disability years ago, but we've had trouble getting her there due to various reasons with her sickness and diagnosis and whatnot. So we've kind of made it this far trying to put bandages on everything.
Two credit cards maxed out. We sort of foolishly took the opportunity to take mortgage forbearance. We were kind of doing it at three months at a time. And through the end of the mortgage forbearance here this year, they will not defer our payments. So they're asking for $13,000 to keep us out of foreclosure.
We weren't aware that after six months, they can't defer payments, but we're in a situation where we're going to file Chapter 13 bankruptcy and restructure, but I wanted to talk to you first.

**Rachel Cruze** (2:14)
Andy, I'm so sorry. That's a lot.

**Dave Ramsey** (2:18)
So, you have $13,000 that you're behind on your home today.

**Andy** (2:23)
Correct.

**Dave Ramsey** (2:24)
And they want it by the end of the year?

**Andy** (2:29)
They want it by the end of this month.

**Dave Ramsey** (2:34)
Okay, so that's a train that's been coming down the track for a while. You've seen it coming for a while, though.

**Andy** (2:43)
Absolutely, yeah.

**Dave Ramsey** (2:44)
Okay. But now, it's on...

**Andy** (2:47)
We thought it was going to be temporary.

**Dave Ramsey** (2:49)
What is your home worth?

**Andy** (2:53)
$350,000. $350,000?

**Dave Ramsey** (2:56)
$350,000?

**Andy** (2:57)
Correct.

**Dave Ramsey** (2:58)
Okay, and what is the mortgage balance? What's it take to pay it off today?

**Andy** (3:02)
$150,000.

**Dave Ramsey** (3:04)
Okay. All right.
And what do you make now?

**Andy** (3:11)
So, I just started a new job a year and a half ago. I used to be on commission, so that was always another thing, too, with trying to manage cash flow, but I'm on salary now at $90,000 a year.

**Dave Ramsey** (3:21)
Okay. That's good news. All right. And you have two credit cards.
The balances on those are what?

**Andy** (3:31)
$18,000.

**Dave Ramsey** (3:33)
Total?

**Andy** (3:34)
Total.

**Dave Ramsey** (3:35)
Okay.

**Andy** (3:35)
All right.

**Dave Ramsey** (3:36)
And how much on your cars? How much do you owe on your cars?

**Andy** (3:40)
One car is paid off. One car, we owe $8,000 on paying $278 a month for it.

**Dave Ramsey** (3:45)
Okay. All right.
And what are the debts?

**Andy** (3:52)
We have $2,000 in medical bills.
Usually, that's kind of a standing number. It seems to rove. I have an $8,000 deductible right now. In previous years, we had a $15,000 deductible that we would max out, and then I refied the house twice in the last handful of years.

**Dave Ramsey** (4:11)
Why?

**Andy** (4:12)
Just to pay off credit cards that we had used for medical expenses, which I know is extremely foolish.
But we keep thinking, we thought it was temporary. We kept thinking she was going to get better.

**Dave Ramsey** (4:25)
Okay.
Well, the reason I'm asking all these questions is it's the only way I can get to your answer. A Chapter 13 bankruptcy takes the balances that you have and you have to pay the minimum normal payment plus something on the arrearage, on the car and on the house for 60 months for five years. Okay? Your unsecured debt can be paid back on a formula that they use when they're calculating it. Some percentage of the $18,000 would be reduced. So pretend like they gave up half of it. So you had $9,000 that would be in the five-year plan as well. Okay? So you're going to be in there for five years and you're going to pay every dime that you owe on the house. It just spreads it out. It's all it does. Okay? There's no deal. There's no back of the mortgage. So that $13,000 is going to be spread out over 60 months plus your regular house payment. So in Chapter 13, you have your regular house payment plus something on this $13,000, whatever $13,000 divided by 60 is. Okay?