Ramsey Tells Daycare Owner: A Low Mortgage Rate Won’t Matter If You Stay in Bankruptcy

A 2.5% mortgage may seem too good to lose, but for one childcare owner who is six months into bankruptcy, holding onto that rate could be what keeps her tied to a five-year court-supervised repayment plan.

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“I don’t care what your interest rate is or your cash flow is. You’re in bankruptcy.” That was Dave Ramsey’s message to Kim, a Charlotte childcare owner who called his show while already six months into a five-year Chapter 13 plan. Her case involves about $120,000 in credit card and personal loan debt, built up while trying to keep the business afloat after COVID. She says the business now generates about $80,000 a year.

Kim also owns two rental properties and is current on both. She wondered whether selling them might help her finish bankruptcy early, but then hesitated. One of the rentals carries a 2.5% mortgage, and the tenant pays $1,950 a month. Co-host Dr. John Deloney captured the dilemma in a brief line: “All for a 2.8%.”

On the surface, her reluctance is understandable. Freddie Mac’s 30-year fixed average reached 7.4% on October 15, 2026, the highest level in a year and 1.1 points above a year earlier. Existing home sales were running at a 3.99 million annual pace in September. That kind of environment explains why many owners hesitate to walk away from cheap loans. In Kim’s case, though, the low rate is also what keeps her legally in bankruptcy.

Ramsey’s View Fits the Numbers

The equity picture is straightforward. The first rental is valued at $275,000 and carries $186,000 in debt, leaving about $89,000.

The second is worth $320,000 with $212,000 owed, leaving about $108,000.

Selling is not free. If 6% goes to agent fees and closing costs, that would total about $35,700 across both properties and leave roughly $161,300 in cash. After paying off the loans, about $41,300 would remain before taxes. Capital gains and depreciation recapture would reduce that amount, but there is still a meaningful cushion.

Now consider the value of the 2.5% mortgage she wants to keep. If the larger $212,000 balance is used as the example, the first year’s interest would be about $5,300.

At a 7.4% rate, the same balance would cost about $10,388 more in interest each year.

That difference is the most the low rate could be worth, and even then only if she needed to borrow again at today’s rates, which she would not. Selling the rental pays off the loan, and she still has her own home. Nothing needs to be replaced.

What matters more is what the bankruptcy is costing her. A typical credit card APR is 21%, which would add about $25,428 a year in interest outside bankruptcy. Chapter 13 protects her from much of that, but it also means living under a court-approved budget and trustee oversight for years.

On another episode, Ramsey said 78% of Chapter 13 plans fail because debtors cannot keep up with the payments. Every month in the plan carries risk. A vacancy or a slow period in the business could put her in danger of failing it.

The Real Question Is Whether the Sale Ends the Case

The key issue is simple: after selling costs, is there enough equity left to cover the debt that caused the bankruptcy in the first place?

In Kim’s case, the answer appears to be yes. Roughly $161,300 in net proceeds would cover the $120,000 debt, meaning a sale could end the plan. By keeping the 2.5% mortgage, she gains a paper advantage of about $10,388 a year, while remaining in bankruptcy the entire time.

For someone else, the result could be different. If the same $120,000 in debt were paired with only $40,000 in equity after costs, a sale would leave most of the debt unresolved and the bankruptcy would continue. In that situation, a 2.5% loan with a tenant paying $1,950 a month would be a low-cost way to support plan payments, and keeping it would make sense.

In both scenarios, the deciding factor is whether selling the property actually fixes the problem.

Four Numbers to Check Before Defending a Low Rate

1. Net equity: Get a comparative market analysis from a local agent for each property, then subtract the payoff amount from the latest mortgage statement. Use the payoff figure, since it is higher than the balance shown on the statement.
2. Exit costs: Start by subtracting 6% for selling costs. Then have a CPA estimate capital gains and depreciation recapture so you know how much cash you would actually keep.
3. Payoff threshold: Ask your bankruptcy attorney what lump sum would satisfy your plan and allow you to exit early. Compare that amount with your net proceeds.
4. Lock-in value: Multiply the loan balance by the spread between your rate and the current 7.4% average. That gives the maximum yearly value of keeping the low rate, which you can then compare against the remaining years in the plan.

If selling the property pays off the debt, then the cheap mortgage is effectively standing between you and bankruptcy relief.