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CONSUMER’S GUIDE TO BANKRUPTCY

WHAT WILL YOU GET FROM THIS GUIDE? A basic understanding of the 2 main types of consumer bankruptcy, valuable insights into evaluating bankruptcy as a debt reduction tool, and practical guidance for finding a quality bankruptcy attorney.

Topics covered: -

An overview of the bankruptcy process. Key bankruptcy terms like: “discharge,” “automatic stay,” and “exemptions.” Chapter 7 bankruptcy: what it is, how it works, and when it is preferred. Chapter 13 bankruptcy: what it is, how it works, and when it is preferred. How bankruptcy can save a home from foreclosure or a car from repossession. 5 good reasons to file bankruptcy. 5 good reasons not to file bankruptcy. 3 alternatives to filing for bankruptcy. 5 questions to ask when interviewing a prospective bankruptcy attorney.


Dear Friend, Deciding if you need to file for bankruptcy is not an easy thing. Why not? Because you do not know if it can help your situation, but you do know there is a lot of emotion that goes along with just thinking about filing. How do you assess bankruptcy as a potential solution to your debt problems? How can you look past the emotional to consider the practical? You begin by reading this guide. I wrote this guide so that individuals, couples, and families just like you can get a better understanding of the bankruptcy process and the different solutions available to you. There is a lot of misinformation out there about bankruptcy, and there are some great aspects of bankruptcy that most people do not know about. For those of you that are considering filing bankruptcy as a means to get out of debt, this guide should be invaluable. I work in Franklin, Tennessee, but the truths and the principles contained in this guide should apply to you no matter what state you live in. And because I am an attorney, I have to provide a disclaimer about the content and purpose of this guide1. I practice bankruptcy law because I get to meet a variety of people from different walks of life and help them walk through their difficult financial situations. I get to see marriages restored, pride returned, burdens lifted, and shame fade away. It is an absolute blessing to do what I do. If you have any questions about what you read in this guide, please feel free to call me at 615-807-1064 or email me at gboutwell@llgtn.com. Cordially,

Gordon    H .    B outwell   

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This guide is for informational purposes only and should not be taken as legal advice or as legal opinion. No attorney-client relationship is created by your reading, using, or relying upon information found within this guide. You should contact your attorney to obtain advice with respect to your particular issue or problem. While I intend to make every effort to ensure that all information in this guide is accurate and current, I do not make any representation or assume liability for the content, accuracy, timeliness, completeness or any other aspect of the information provided.

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Got a question about your situation or something you read in this guide? Feel free to email me at gboutwell@llgtn.com, call me at 615-807-1064, or visit my website at www.llgtn.com.


TABLE OF CONTENTS

What is bankruptcy?..................................................................................................................4 Terms you need to know: DISCHARGE........................................................................................................6 AUTOMATIC STAY..........................................................................................7 EXEMPTIONS......................................................................................................8 Chapter 7 bankruptcy...........................................................................................................10 Chapter 13 bankruptcy.........................................................................................................11 Saving a home from foreclosure or a car from repossession.............................12 5 good reasons to file bankruptcy...................................................................................13 5 good reasons not to file bankruptcy...........................................................................16 3 alternatives to filing for bankruptcy...........................................................................19 5 questions to ask when meeting a prospective bankruptcy attorney............20 About the author……………………………………………………………….…25 3

Got a question about your situation or something you read in this guide? Feel free to email me at gboutwell@llgtn.com, call me at 615-807-1064, or visit my website at www.llgtn.com.


WHAT IS BANKRUPTCY?

Bankruptcy  is  a   legal  process  in  which   individuals,  couples,   families,  and   businesses  can   eliminate,  repay,  or   restructure  some  or   all  of  their  debts.      

There  are  2  main  types  of  consumer  bankruptcies:   Chapter  7  and  Chapter  13.    Both  help  you  with  your   debt,  but  in  very  different  ways.         As  you  consider  bankruptcy  as  a  possible  debt   resolution  tool,  it  is  important  to  know  how  and  to   what  extent  each  chapter  eliminates  debt,  and  what  is   required  of  you  during  each,  so  that  you  can  know   which  option  is  the  best  for  you.

WHY FILE?

       

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People  file  bankruptcies  for  a  variety  of  reasons.         You  may  file  to  obtain  a  discharge  of  their  debts.    The   discharge  frees  you  from  your  oppressive  financial   situation,  and  provides  you  a  fresh  financial  start,  by   eliminating  some  or  all  of  your  debts.         You  could  also  file  to  invoke  the  automatic  stay,   which  can  stop  creditor  harassment  and  lawsuits,  and   protect  your  house  from  foreclosure,  your  car  from   repossession  or  your  paycheck  from  garnishment.     Others  file  to  restructure  and  consolidate  debt  into  a   manageable  payment.        

Got a question about your situation or something you read in this guide? Feel free to email me at gboutwell@llgtn.com, call me at 615-807-1064, or visit my website at www.llgtn.com.


WHAT IS BANKRUPTCY?

Bankruptcy  is  a   legal  proceeding  in   federal  court  in  which   a  person  with  more   debts  than  they  can   pay  seeks  relief  from   those  debts.            

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BASIC BANKRUPTCY REQUIREMENTS In  any  bankruptcy  you  must  provide  certain   information  to  the  Court,  your  creditors,  and  your   Trustee  (a  court  appointed  attorney  that  oversees   your  case).    The  typical  case  requires  you  to  detail:     1. All  of  your  assets  (everything  you  own);   2. All  of  your  liabilities  (everyone  you  owe);   3. Your  current  and  expected  future  income;   4. Your  current  and  expected  future  expenses;   5. The  specific  state  laws  that  you  are  using  to   exempt  your  assets  from  your  creditors.       You  must  also  file  certain  documents,  including:   1. A  statement  of  your  recent  financial  affairs;   2. A  certificate  of  credit  counseling  from  an   approved  provider  (or  a  waiver);   3. Your  most  recent  tax  return;   4. Your  most  recent  60  days’  worth  of  pay  stubs   or  other  proof  of  income.       At  some  point  during  your  case  you  will  go  to  what  is   called  a  “Meeting  of  Creditors,”  where  your  Trustee   and  your  creditors  have  the  right  to  ask  you  questions   about  your  case.         For  the  vast  majority  of  debtors,  this  is  the  only  time   you  will  go  to  “Court,”  and  few,  if  any,  creditors  will   attend.        

Got a question about your situation or something you read in this guide? Feel free to email me at gboutwell@llgtn.com, call me at 615-807-1064, or visit my website at www.llgtn.com.


WHAT IS A BANKRUPTCY DISCHARGE?

The  bankruptcy   discharge  releases  a   debtor  from  their   obligation  to  repay   certain  debts,  and  it   also  protects  debtors   when  creditors   attempt  to  collect  on   these  debts.                                        

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One  of  the  main  reasons  why  people  file  bankruptcy  is   to  obtain  a  discharge  of  their  debts.    When  you   complete  your  bankruptcy  case,  you  no  longer  owe  the   debts  that  were  discharged,  and  the  creditors  can   never  come  after  you  to  collect  on  those  debts  ever   again.     Not  all  of  your  debts  will  necessarily  be  discharged.     Certain  types  of  debts  will  not  be  discharged  as  a   matter  of  law,  and  other  debts  may  not  be  discharged   because  of  something  you  have  done  or  not  done.            

COMMON DISCHARGEABLE

COMMON NON-DISCHARGEABLE

DEBTS

DEBTS

1. 2. 3. 4. 5.

Credit  cards;   Medical  bills;   Personal  loans;   Check  advances;   Fees  owed  to   professionals  (like   attorneys  and  CPAs);   6. Deficiencies  for   foreclosed  homes   and  repossessed   vehicles.      

1. Domestic  Support   Obligations  (child   support  &  alimony);   2. Student  Loans   (unless  certain   circumstances  exist);   3. Debts  for  money   obtained  by  lying  or   through  deceit  (like   fraud,  larceny,  false   representations,  or   embezzlement);   4. Debts  arising  out  of   willful  or  malicious   injury;   5. Debts  not  listed  on   the  schedules.     in this guide? Got a question about your situation or something you read Feel free to email me at gboutwell@llgtn.com, call me at 615-807-1064, or visit my website at www.llgtn.com.


WHAT IS THE AUTOMATIC STAY?

The  automatic  stay  

   

is  a  shield  that   prevents  creditors   from  contacting  a   debtor,  harassing  a   debtor,  or  continuing   their  efforts  to  collect   against  a  debtor  once   they  have  filed  a   bankruptcy  case.    

                 

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In   addition   to   the   bankruptcy   discharge,   one   of   the   other  main  reasons  why  people  file  for  bankruptcy  is   the   automatic   stay.     The   stay   goes   into   effect   automatically  and  immediately  upon  the  filing  of  your   case.1           The  bankruptcy  automatic  stay  immediately  stops   LAWSUITS,  FORECLOSURES,  GARNISHMENTS,  and  all   collection  efforts  against  you  and  your  property.           The  automatic  stay  is  not  an  absolute  shield,  though.    It   will  not  stop  the  commencement  or  the  continuation  of   certain  civil  and  criminal  actions.    

COMMONLY “STAYED” ACTIONS

COMMON ACTIONS THAT WILL CONTINUE

1. The  beginning  or   continuing  of  a   lawsuit  or  other   judicial  proceeding   against  you;   2. The  enforcement  or   execution  of  a   judgment  against   you;   3. Actions  to  obtain   possession  or   exercise  control  over   your  property;   4. Actions  to  create,   perfect,  or  enforce  a   lien  against  your   property;  

1. 2. 3.

4.

Criminal  actions;   Civil  action  for   dissolution  of   marriage;   Civil  action  for   establishment  or   modification  of  a   domestic  support   obligation;   Civil  actions  for   establishment  of   paternity.  

 

  situation or something you read in this guide? Got a question about your Feel free to email me at gboutwell@llgtn.com, call me at 615-807-1064, or visit my website at www.llgtn.com.


WHAT ARE EXEMPTIONS?

Exemptions  are  the   laws  that  shield  a   debtor’s  assets  from   their  creditors  and   permit  debtors  to   retain  property  after   the  conclusion  of  their   bankruptcy.      

                                     

 

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THE MYTH   One  of  the  most  common  misconceptions  about   bankruptcy  is  that  you  lose  everything  you  own  when   you  file.    For  the  vast  majority  of  consumers,  this  is   simply  not  true.    In  2010,  there  were  1.139  million   Chapter  7  bankruptcies,  and  less  than  6%  of  these  case   resulted  in  a  debtor  losing  assets.        

THE TRUTH How  is  this  possible?    Well,  first  off,  the  purpose  of   bankruptcy  is  not  to  punish  you  for  your  past.    Second,   when  you  come  out  of  your  bankruptcy,  you  need  to   retain  certain  necessities  of  life  in  order  to  make  the   most  of  your  fresh  start.     By  applying  exemptions  against  your  personal   property  and  your  home,  you  shield  your  assets  from   your  creditors,  and  you  retain  them  after  the   conclusion  of  your  bankruptcy.  

LIMITATIONS There  are  limitations  to  how  much  property  you  can   protect.    Any  personal  property  or  home  equity  that  is   not  protectable  can  potentially  be  seized  for  the   benefit  of  creditors.       Some  common  Tennessee  exemptions  are  listed  on  the   next  page.      

Got a question about your situation or something you read in this guide? Feel free to email me at gboutwell@llgtn.com, call me at 615-807-1064, or visit my website at www.llgtn.com.


WHAT ARE EXEMPTIONS?

 

YOUR PERSONAL PROPERTY  

Tennessee  state  law  allows  you  to   protect  your  personal  property  to  a   certain  degree.    Here  are  a  few  of  the   most  notable  exemptions.       1. $10,000  of  personal  property,   including  money  and  bank   accounts,  household  goods  and   furnishings,  jewelry,  firearms,   sports  and  hobby  equipment,   and  motor  vehicles  to  the  extent   they  are  not  secured  by  a  lien.         2. $1,900  worth  of  tools  of  your   trade,  including  instruments,   books,  and  other  tools  used  in   your  profession.         3. 100%  of  Health  Savings   Accounts,  401ks,  IRAs,  pensions,   and  other  qualified  retirement   plans.     4. 100%  of  Social  Security,   Disability,  and  workers’   compensation  benefits.  

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  YOUR REAL PROPERTY (HOME)   In  the  state  of  Tennessee,  the  amount   of  equity  in  your  home  that  you  can   exempt  depends  upon  your  age,   whether  you  are  filing  with  your   spouse,  and  whether  you  have  minor   children  in  your  legal  custody.       • If  you  are  any  age,  with  custody   of  minor  children,  you  can   protect  $25,000  of  your  home   equity  if  you  file  by  yourself,  or   $50,000  if  you  file  with  your   spouse.     • If  you  are  under  the  age  of  62,   without  custody  of  minor   children,  then  you  can  protect   $5,000  of  your  home  equity  if   you  file  by  yourself,  or  $7,500  if   you  file  with  your  spouse.     • If  you  are  over  the  age  of  62,   without  custody  of  minor   children,  then  you  can  protect   $12,500  of  your  home  equity  if   you  file  by  yourself  or  $20,000   (if  only  one  of  you  is  over  the  age   of  62)  or  $25,000  if  you  file  with   your  spouse  (and  both  of  you  are   over  the  age  of  62).    

Got a question about your situation or something you read in this guide? Feel free to email me at gboutwell@llgtn.com, call me at 615-807-1064, or visit my website at www.llgtn.com.


CHAPTER 7 BANKRUPTCY

Chapter  7  is  called   Liquidation.    It  is  also   referred  to  as   “straight”  bankruptcy.  

HOW IT WORKS   •

 

 

       

An   appointed   Chapter   7   Trustee   liquidates   any   of   your   non-­‐exempt   assets   and   uses   the   proceeds   to   pay  your  creditors.    PLEASE  NOTE:  Rarely  are  there   any   assets   to   liquidate,   as   the   laws   of   the   state   of   Tennessee   usually   allow   you   to   protect  most,   if   not   all,  of  your  assets.       You  must  qualify  for  7  by  passing  the  “Means  Test,”   which   compares   your   average   monthly   income   to   that  of  a  similarly  sized  household  in  Tennessee.     Most  Chapter  7s  last  about  4  months,  from  the  date   you  file  until  the  date  you  receive  your  discharge  of   your  debts.  

 

WHEN IS CHAPTER 7 PREFERRED?

WHAT HAPPENS TO THE DEBTS?

 

 

Most  if  not  all  of  your   debts  are  unsecured.       You  are  current  on  the   secured  debts  you   want  to  keep,  or  you   wish  to  surrender  the   secured  collateral   back  to  the  creditor.   Your  assets  are  fully   protected  by  state   exemptions.    

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In  most  cases,  your  unsecured  debt  (e.g.,  credit   cards,  medical  bills,  signature  and  personal  loans,   vehicle  repo  or  home  foreclosure  deficiencies)  will   be  discharged.    Student  Loans  will  most  likely  not   be  discharged,  though.   Most  priority  debts  like  income  taxes  and  domestic   support  obligations  survive  the  discharge,  meaning   that  you  will  continue  to  owe  them  after  you   receive  your  discharge.       You  usually  can  choose  whether  and  how  you  want   to  keep  your  secured  debts  (e.g.,  vehicle  with  a   loan,  home  with  a  mortgage)     You  may  choose  to  surrender  a  secured  asset   without  owing  a  deficiency  that  arises  when  your   creditor  resells  it.    

  situation or something you read in this guide? Got a question about your Feel free to email me at gboutwell@llgtn.com, call me at 615-807-1064, or visit my website at www.llgtn.com.


CHAPTER 13 BANKRUPTCY

Chapter  13  

HOW IT WORKS  

bankruptcy  is  called   Adjustment  of  Debts   of  An  Individual   with  Regular   Income.  

 

   

Chapter  13  is  a  3  to  5  year  repayment  plan  that   consolidates  your  debts  into  a  manageable   payment.         You  make  regular  payments  to  the  Chapter  13   Trustee,  who  in  turn  sends  the  money  to  your   creditors  according  to  the  plan  that  you  have  put   together  and  that  the  court  and  creditors  confirm.       The  amount  of  money  that  you  repay  your   creditors  is  based  upon  your  monthly  income  and   expenses,  as  well  as  your  assets.      

 

 

WHEN IS CHAPTER 13 PREFERRED?

WHAT HAPPENS TO THE DEBTS?

 

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You  are  facing   foreclosure  on  your   home  or  repossession   of  your  car.   You  have  assets  that   are  not  protected  by   state  exemptions  that   you  do  not  want  to   lose,  like  a  home  with   significant  equity  or  a   vehicle  with  no  lien.   You  have  significant   tax  debt  that  you  want   to  repay  in  a  finite   time  without  further   penalties  and  interest.  

In  most  cases,  you  will  repay  a  certain  percentage   of  your  unsecured  debt  and  all  of  your  secured   debts  (excluding  long-­‐term  debts  like   mortgages).    When  you  finish  your  plan,  usually  all   you  will  owe  will  be  your  continuing  mortgage.   You  can  potentially  lower  your  interest  rate  and   monthly  payment  on  your  car  and  other  secured   debts   Your  plan  will  most  likely  pay  back  any  IRS  tax  debt   or  domestic  support  obligations  that  you  owe.      

         

Got a question about your situation or something you read in this guide? Feel free to email me at gboutwell@llgtn.com, call me at 615-807-1064, or visit my website at www.llgtn.com.


FORECLOSURE AND REPOSSESSION

Foreclosure  is  a   legal  process  in  which   a  secured  lender   retakes  ownership   and  control  of  a  piece   of  real  property  from   the  borrower.    

Did  you  know  that  you  can  save  your  home  from   foreclosure  or  your  car  from  repossession  by  filing   Chapter  13  bankruptcy?         It’s  true.         In  a  Chapter  13  you  can  put  together  a  plan  to  keep   your  home,  your  car,  and  other  collateral  that  a   creditor  is  threatening  to  take  back.        

 

AVOIDING REPOSSESSION

AVOIDING FORECLOSURE

  Countless  people  have  used  Chapter  13  for  just  this     purpose.    When  your  mortgage  company  will  not  work   If  your  are  behind  on   with  you  as  you  try  to  catch  up  your  payments,  or   your  car  payments,  and   when  your  attempts  to  modify  your  mortgage  fail,   the  lender  is  threatening   filing  a  3  may  be  your  best  option  to  retain  the  home   to  repossess  it,  you  can   and  work  out  a  repayment  plan  for  what  you  owe  on  it.           file  Chapter  13  and     propose  to  repay  the   Even  if  your  mortgage  company  has  begun  the   loan,  late  fees,  etc.   foreclosure  process,  you  may  still  have  time  to  file  for   through  your  plan.    Once   Chapter  13.    In  most  circumstances,  the  filing  of  a   the  case  is  filed,  the   bankruptcy  will  invoke  the  automatic  stay,  stopping   automatic  stay  goes  into   the  foreclosure  from  happening.    So  long  as  you   effect,  and  the  creditor   comply  with  your  plan  and  meet  all  your  obligations   cannot  come  pick  up  your   during  your  Chapter  13,  the  mortgage  company  should   vehicle.                   not  be  able  to  touch  your  home.       In  some  situations,  you   13  deals  with  your  mortgage  in  2  important  ways:   may  be  able  to  regain   1. It  makes  the  continuing  mortgage  payment  due   possession  of  a  vehicle   on  the  house;  and   that  has  been  recently   2. It  pays  all  the  arrearages  due  to  the  mortgage   repossessed  by  filing   company  so  that  you  become  current  by  the  time   Chapter  13.   you  complete  your  case.     12 Got a question about your situation or something you read in this guide? Feel free to email me at gboutwell@llgtn.com, call me at 615-807-1064, or visit my website at www.llgtn.com.


5 GOOD REASONS TO FILE BANKRUPTCY  

Not  sure  if  filing   bankruptcy  is  for  you?       Here  are  five   situations  in  which   filing  bankruptcy,  or   at  least  talking  with   someone  about  it,   would  be  a  good  idea.                                                  

1. YOU DO NOT HAVE ENOUGH INCOME TO PAY YOUR LIVING EXPENSES AND YOUR DEBTS.   This  is  one  of  the  most  common  reasons  to  file  for   bankruptcy.    There  is  simply  not  enough  money  left   over  at  the  end  of  the  month  to  pay  your  living   expenses  and  your  bills.      You  could  have  had   significant  medical  illness  or  injury  or  loss  of   employment  or  reduction  in  pay.         Regardless  of  the  reason,  you  cannot  seem  to  get   ahead,  you  feel  like  all  you  are  doing  is  spinning  your   wheels,  and  you  cannot  see  a  light  at  the  end  of  the   tunnel.    You  would  love  to  be  saving  money  each   month,  but  your  minimum  payments  on  your  loans   and  credit  cards  and  the  like  make  that  impossible.        

Bankruptcy  may  be  a  good  way  for   you  to  break  the  cycle  of  financial   distress  and  start  over.    It  is  designed  to  

give  you  a  fresh  financial  start  by  eliminating  most  (if   not  all)  of  your  debts  while  allowing  you  to  keep  most   (if  not  all)  of  your  possessions.            

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Got a question about your situation or something you read in this guide? Feel free to email me at gboutwell@llgtn.com, call me at 615-807-1064, or visit my website at www.llgtn.com.


5 GOOD REASONS TO FILE BANKRUPTCY

2. YOUR CREDITORS WILL NOT STOP HARRASSING YOU OR YOUR WAGES ARE BEING GARNISHED.

  If  you  are  behind  on  a  bill,  the   creditor  has  the  right  to  call  you  to   collect  on  that  debt.    They  must   comply  with  the  provisions  of  the   Fair  Debt  Collection  Practices  Act,   which  is  something  you  should   definitely  read  through.    You  can   find  a  copy  of  the  act  here:       http://www.ftc.gov/bcp/edu/pubs/consumer /credit/cre27.pdf  

    Some  creditors  are  more  aggressive   than  others,  and  no  matter  how  dire   your  financial  situation,  they   demand  more  of  you  than  you  can   offer.    They  want  a  payment  sooner   than  you  can  provide  or  they  want   more  money  than  you  can  afford  to   pay.    They  will  not  listen  to  reason   and  they  call  at  all  times  of  the  day   and  into  the  evening,  demanding   payment.    Or  perhaps  they  have   already  sued  you  and  gotten  a   judgment.    Now  your  paycheck  is   being  garnished,  and  you  are   struggling  even  more  to  make  ends   meet.        

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The  filing  of  a  bankruptcy   protects  you  from  creditor   harassment  and  wage   garnishment.    When  you  file,   the  automatic  stay  immediately   goes  into  effect,  and  your  creditors   are  prohibited  from  continuing  to   call  you  to  collect,  they  cannot  sue   you  for  your  debt,  and  they  must   stop  the  garnishment  on  your  check.    

3. YOU HAVE A MOUNTAIN OF DEBT AND IT WOULD TAKE YOU FOREVER TO DIG OUT FROM UNDER IT.

  It  is  possible  that,  while  you  have   money  left  over  at  the  end  of  the   month  to  pay  your  debts,  you  simply   have  such  a  large  amount  of  debt  that   it  would  take  you  years  and  years  to   come  out  from  underneath  it  all.         No  doubt  there  is  incredible  value  in   working  a  debt  repayment  plan  and   seeing  it  through  to  the  end.    On  the   other  hand,  if  you  feel  that  you  have   learned  from  your  past  and  know   how  to  better  prepare  for  the  future,   or  if  you  want  to  get  out  from   underneath  your  debts  sooner  rather   than  later,  then  bankruptcy  may  be  a   good  choice  for  you.     Got a question about your situation or something you read in this guide? Feel free to email me at gboutwell@llgtn.com, call me at 615-807-1064, or visit my website at www.llgtn.com.


5 GOOD REASONS TO FILE BANKRUPTCY

4. YOUR RELATIONSHIPS ARE SUFFERING BECAUSE OF YOUR

5. YOU HAVE A MORTGAGE ON AND POSSESSION OF A HOME THAT YOU

STRUGGLES WITH DEBT.

NO LONGER WANT OR CANNOT

  Money  problems  can  devastate   relationships.    The  most  solid   marriage  or  family  can  be  torn  apart   over  issues  of  money.    The  most  mild-­‐ mannered  and  gentile  man  or  woman   can  become  an  absolute  jerk  when   finances  are  too  tight.         When  your  situation  has  become   dire,  and  you  can  feel  your  important   relationships  unraveling,  it  may  be   time  to  take  some  drastic  action.    You   may  have  never  thought  that  you   would  be  one  of  “those  people”  that   file  bankruptcy.        

AFFORD.

There  is  no  shame  in   filing  bankruptcy.    You   are  not  a  bad  person  for   filing.    You  can  take  responsibility  

for  your  financial  situation  instead  of   letting  it  get  worse  and  hurting  you   and  your  family  even  more.  

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  Many  people  file  bankruptcies  to   retain  a  home  that  is  in  foreclosure,   but  what  can  you  do  when  you  do  not   want  to  keep  your  house  anymore?     Maybe  you  are  having  a  hard  time   selling  it,  or  you  owe  more  on  the   house  than  it  is  worth.    Or  you  got   divorced  and  your  ex  stuck  you  with   the  mortgage  note.     In  most  bankruptcies,  you  can   surrender  the  home  back  to  the   mortgage  company  and  not  owe  on   the  mortgage  once  you  get  your   discharge.    The  mortgage  company   will  eventually  remove  the  property   from  your  name,  either  by   foreclosure  or  a  deed-­‐in-­‐lieu  of   foreclosure  or  something  similar.     You  will  still  be  liable  for  any   homeowner’s  association  fees  that   you  have  with  the  property  until  the   mortgage  company  obtains   possession.        

Got a question about your situation or something you read in this guide? Feel free to email me at gboutwell@llgtn.com, call me at 615-807-1064, or visit my website at www.llgtn.com.


5 GOOD REASONS NOT TO FILE BANKRUPTCY

1. MOST OF YOUR DEBTS ARE NONDISCHARGEABLE, SO BANKRUPTCY DOES NOT HELP YOU.   Bankruptcy  is  a  great  tool  to   eliminate  debt,  and  it  can  wipe  out   most  debts,  but  there  are  certain   debts  that  your  bankruptcy  cannot   eliminate.    If  a  large  portion  of  your   debts  is  not  going  to  be  discharged  in   bankruptcy,  then  you  should  strongly   consider  whether  filing  bankruptcy   makes  sense.         For  instance,  suppose  you  want  to  file   Chapter  7  to  get  rid  of  some  credit   card  debt  but  you  also  owe  a  lot  of   student  loan  debt.    In  this  situation,   filing  for  Chapter  7  bankruptcy  will   likely  not  do  a  lot  for  you.    Sure,  you   got  rid  of  some  credit  card  debt,  but   your  student  loans  will  most  likely   not  be  discharged  in  your   bankruptcy.    The  same  is  true  with   most  taxes,  child  support  and   alimony,  and  other  nondischargeable   debts  (for  more  about   nondischargeable  debts,  please  read   through  page  6  of  this  guide).      

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 Where  a  large  portion  of  

your  debt  will  not  going   to  be  discharged,  then   filing  for  bankruptcy   may  not  be  your  wisest   course  of  action.      

 What  does  this  all  mean?    You  get  rid   of  some  debt,  you  still  owe  on  the   nondischargeable  debts,  and  you   need  a  smart  repayment  plan  to   address  those  debts.    You  would  have   to  do  that  even  if  you  do  not  file   bankruptcy,  so  what  do  you  really   gain  by  filing?         It  is  important  to  know  which  of  your   debts  will  be  discharged,  and  which   will  not,  so  that  you  can  properly   evaluate  bankruptcy  as  a  possible   debt  elimination  tool.            

Got a question about your situation or something you read in this guide? Feel free to email me at gboutwell@llgtn.com, call me at 615-807-1064, or visit my website at www.llgtn.com.


5 GOOD REASONS NOT TO FILE BANKRUPTCY

   

2. YOU HAVE THE FINANCIAL MEANS TO GET OUT OF DEBT YOURSELF, AND BANKRUPTCY DOES NOTHING SPECIAL FOR YOU.

  Your  situation  may  not  be  as  dire  as   you  think.  You  may  be  able  to  pay   them  off  yourself  without  filing  for   bankruptcy.     Your  income  and  your  expenses  drive   your  debt  repayment  options.    If  you   make  significantly  more  per  month   than  you  spend,  then  you  should   strongly  consider  setting  up  debt   repayment  plans  with  your  individual   creditors.         If  you  make  a  lot  of  money,  and  you   do  decide  to  file  a  bankruptcy,  then   you  may  be  required  to  repay  all  or  a   large  part  of  your  debt  back  to  the   creditors.    In  so  doing,  you  have   forfeited  the  ability  to  try  to  negotiate   the  balances  on  the  debts,  and  you   have  paid  your  attorney  and  your   Trustee  to  oversee  your  case.        

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Unless  you  gain   something  extra  by  filing   the  bankruptcy,  then  it   may  not  be  your  best   option.    That  something  extra  for   you  may  mean  the  ability  to  can  catch   up  your  mortgage  payments  over   time,  surrender  your  home  without   penalty,  or  pay  off  your  student  loans   or  tax  debt  in  a  finite  time.      

3. YOUR EMPLOYMENT DEPENDS UPON YOUR CREDIT SCORE.

  Several  professions,  especially  those   that  require  major  financial   responsibilities,  place  a  large  value   upon  credit  score.       Filing  for  bankruptcy  will  have  a   negative  impact  your  credit  score.     But  the  bankruptcy  may  only  have  a   relatively  small  impact  on  your  score   because  of  the  history  of  late   payments,  large  debts,  and  other   financial  issues  that  drove  you  to  file   for  bankruptcy  in  the  first  place.           Current  and  future  employers  cannot   discriminate  against  you  because  you   filed.     Got a question about your situation or something you read in this guide? Feel free to email me at gboutwell@llgtn.com, call me at 615-807-1064, or visit my website at www.llgtn.com.


5 GOOD REASONS NOT TO FILE BANKRUPTCY

 

4. YOU HAVE ASSETS THAT YOU DO NOT WANT TO LOSE.

5. EVEN WITH A DISCHARGE, YOU DO

  If  you  have  more  equity  in  your  home   or  belongings  than  you  can  protect  by   law,  then  you  run  the  risk  of  losing   that  asset  if  you  file  for  Chapter  7.     The  Trustee  would  see  if  taking  the   asset  makes  money  for  your   creditors,  and  if  so,  then  the  Trustee   will  require  you  to  turn  it  over.         You  have  2  options  in  this  situation:         1. File  Chapter  13  bankruptcy,  and   repay  your  creditors  the  value  of   the  asset,  which  could  require   you  to  repay  most  or  all  of  your   unsecured  debt.     2. Sell  the  asset  yourself  and   negotiate  with  your  creditors   with  the  proceeds  outside  of   bankruptcy.                

INCOME TO MEET YOUR MONTHLY

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NOT HAVE ENOUGH MONTHLY EXPENSES.

  Bankruptcy  is  designed  to  be  a   springboard  to  a  new  life.    It  should   help  you  not  only  in  the  short  term,   but  the  long  term  as  well.    Ideally,   without  the  burden  of  your  debts,  you   can  save,  make  your  income  work  for   you,  and  plan  for  your  future.    The   last  thing  you  want  to  do  is  to  file  a   bankruptcy  where  you  have  no  hope   of  a  better  life  upon  its  completion.       As  an  example,  if  you  have  monthly   income  of  $2,000,  but  your  monthly   expenses  alone  are  $2,500,  then  filing   for  bankruptcy  does  not  help  you  in   the  long  run.    Bankruptcy  provides   you  some  relief  by  eliminating  some   debt,  but  you  will  be  right  back  where   you  started  in  a  matter  of  months   because  your  income  is  greater  than   your  expenses.           If  you  do  not  have  the  means  to  move   on  with  your  life  after  bankruptcy,   then  it  may  not  be  the  right  time  to   file.               Got a question about your situation or something you read in this guide?   Feel free to email me at gboutwell@llgtn.com, call me at 615-807-1064,   or visit my website at www.llgtn.com.


3 ALTERNATIVES TO FILING FOR BANKRUPTCY

   

1. DO NOTHING.

  This  is  always  a  choice.    You  can   ignore  the  collection  notices,  not   answer  the  creditors’  calls,  and  avoid   the  certified  letters  waiting  for  you  at   the  Post  Office.    You  can  bury  your   head  in  the  sand  and  pray  that  your   creditors  give  up,  quit  calling,  or   forget  where  you  live.     But  you  do  not  get  out  of  debt  by   avoiding  it.    You  get  out  of  debt  by   being  proactive,  getting  help,  and   having  a  plan.  

2. PAY OFF YOUR DEBTS IN FULL.   This  is  exactly  what  it  sounds  like.     You  have  debt  and  you  repay  it  all.     You  pay  at  least  your  minimum   payments  every  month,  you  sell   things  to  raise  extra  money  to  make   larger  payments,  and  you  attack  the   debt.       Paying  off  debts  in  full  works  well   when  you  adhere  a  solid  budget  a   debt  snowball  plan.    You  can  find   more  information  online  on  these   topics.           19

3. NEGOTIATE YOUR DEBTS.   Debt  negotiation  is  a  method  of  debt   reduction  in  which  you  and  your   creditors  agree  to  a  settlement  of   your  debt  for  less  than  what  you   owe.       The  goal  of  debt  negotiation  is  to   eliminate  your  debt  in  the  manner   that  makes  the  most  financial  sense   for  you.    That  could  mean  payments   over  time,  a  lump-­‐sum  payment,  or   some  combination  of  both.     You  can  negotiate  your  debts   yourself,  or  you  can  hire  a  third   party  like  an  attorney  or  debt   management  group  to  help  you.    

Got a question about your situation or something you read in this guide? Feel free to email me at gboutwell@llgtn.com, call me at 615-807-1064, or visit my website at www.llgtn.com.


5 QUESTIONS TO ASK WHEN MEETING A PROSPECTIVE BANKRUPTCY ATTORNEY

How  do  you  choose   your  bankruptcy   attorney?  Start  with   these  5  questions.     THE 5 QUESTIONS TO ASK:  

1. 2.

  3.   4.   5.

What  is  your  background   in  bankruptcy?     How  does  bankruptcy   compare  with  my  other   options  for  getting  out  of   debt?   How  much  does  it  cost  to   file  Chapter  7  or  13?   How  much  will  I  see  and   talk  to  you  personally   during  my  case?   How  does  your  practice   differ  from  your   competition?  

 

       

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At  some  point  in  your  journey  to  get  out  of  debt,  you   may  decide  to  speak  with  a  bankruptcy  attorney  for  a   variety  of  reasons.    A  lot  of  people  go  just  to  learn  more   about  how  bankruptcy  works,  while  others  meet  with   an  attorney  for  the  specific  goal  of  filing.         Regardless  of  your  reason,  you  want  to  make  a  wise   decision  when  you  choose  a  bankruptcy  attorney  to   represent  you.    You  are  going  to  pay  money  to  this   person  to  perform  a  service  for  you,  and  you  deserve   to  have  the  service  performed  properly  and  timely.         In  the  care  of  an  experienced,  competent  bankruptcy   attorney,  you  should  know  what  to  expect  from  the   start  of  your  case,  whether  there  are  any  potential   pitfalls  or  complications  and  what  can  be  done  about   them,  and  how  the  case  should  conclude.    The   presence  and  counsel  of  a  seasoned  professional  can   help  make  the  bankruptcy  process  fell  a  little  less   nerve-­‐racking.             To  help  you  in  choosing  a  bankruptcy  attorney,  here   are  5  questions  to  ask  during  your  initial  consultation.     The  attorney  will  ask  you  numerous  questions  to  get  a   better  understanding  of  your  situation  and  what  can   be  done  about  it.    In  turn,  you  should  ask  the  attorney   some  questions  to  get  a  better  feel  for  their  ability  to   adequately  represent  you.        

Got a question about your situation or something you read in this guide? Feel free to email me at gboutwell@llgtn.com, call me at 615-807-1064, or visit my website at www.llgtn.com.


5 QUESTIONS TO ASK WHEN MEETING A PROSPECTIVE BANKRUPTCY ATTORNEY 1. WHAT IS YOUR BACKGROUND IN BANKRUPTCY?

2. HOW MUCH WILL I SEE/TALK TO

  This  question  gets  at  the  attorney’s   competence  to  handle  your  case.     Bankruptcy  is  a  highly  specialized   area  of  law  that  requires  attention  to   detail  and  strategic  planning.    It  is  not   something  that  an  attorney  can  just   do  on  the  side  as  part  of  their   practice.         To  that  end,  be  sure  you  know  by  the   end  of  your  meeting  with  an  attorney:   A. How  long  this  attorney  has   practiced  bankruptcy;     B. What  percentage  of  the   attorney’s  practice  is   bankruptcy;   C. What  percentage  of  the   attorney’s  cases  are  debtor  or   consumer,  and  what  percentage   are  business  cases;   D. What  the  attorney  does  to  stay   current  on  developments  in  the   law.              

  It  is  important  to  know  early  in  the   bankruptcy  filing  process  what  you   should  expect  from  your  attorney.     Given  the  nature  of  the  practice,  many   attorneys  have  paralegals  and  other   support  staff  to  handle  most  of  the   meetings  and  communications  with   clients,  while  the  attorney  attends   court,  negotiates  with  other  parties,   and  oversees  the  more  complicated   matters  of  the  cases.         With  other,  smaller  firms,  the   attorney  and  maybe  one  assistant   likely  handle  all  matters  from   answering  the  phones  to  meeting  all   the  clients  to  preparing  all  the   bankruptcy  forms.             So  decide  early  what  you  want  from   your  bankruptcy  attorney,  and   choose  accordingly.            

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YOU PERSONALLY DURING MY CASE?

Got a question about your situation or something you read in this guide? Feel free to email me at gboutwell@llgtn.com, call me at 615-807-1064, or visit my website at www.llgtn.com.


5 QUESTIONS TO ASK WHEN MEETING A PROSPECTIVE BANKRUPTCY ATTORNEY  

 

3. HOW MUCH DOES IT COST TO FILE CHAPTER 7 OR CHAPTER 13?   Obviously  one  of  the  main  concerns   when  you  look  to  file  bankruptcy  is   the  cost.    Bankruptcy  attorneys   usually  do  not  charge  hourly  rates,   instead  charging  a  flat  fee  for  their   services.                 As  you  consider  filing  bankruptcy   with  a  particular  attorney,  you  should   know  the  following:     1. The  base  fee  for  representation;     2. The  services  covered  under  this   base  fee;   3. The  services  not  covered  under   the  base  fee;  and     4. The  cost  for  the  non-­‐base  fee   services.         For  Chapter  7,  most  attorneys   charge  a  base,  flat  fee  to  prepare,  file,   and  see  a  Chapter  7  through   completion.    The  price  may  vary   depending  upon  whether  you  file   individually,  with  your  spouse,  or  for   your  business.         22

As  part  of  your  agreement,  the   attorney  may  charge  further  fees  if   any  unexpected  complications  arise   or  if  additional  services  are  required.         The  attorney’s  fees  for  Chapter  7  are   typically  much  less  than  for  Chapter   13,  although  the  attorney  usually   requires  most  if  not  all  of  their  fees   paid  up  front  before  the  filing  of  the   case.         In  Chapter  13,  most  of  the  time  the   attorney  will  elect  to  receive  a  court-­‐ awarded  fee  that  is  based  entirely   upon  the  debt  in  your  case.    Many   firms  require  little  or  no  up  front  fees   to  file  13,  with  the  remaining  portion   of  the  fee  paid  through  your  plan.    So   every  time  you  make  a  Chapter  13   payment,  a  portion  of  that  goes  to   your  attorney.              

Got a question about your situation or something you read in this guide? Feel free to email me at gboutwell@llgtn.com, call me at 615-807-1064, or visit my website at www.llgtn.com.


5 QUESTIONS TO ASK WHEN MEETING A PROSPECTIVE BANKRUPTCY ATTORNEY

4. HOW DOES BANKRUPTCY COMPARE WITH MY OTHER OPTIONS FOR GETTING OUT OF DEBT?

  Any  good  bankruptcy  attorney  will   help  you  to  evaluate  all  of  your   options  for  getting  out  of  debt,  even  if   that  means  you  do  not  file.    They   should  analyze  your  income  and   expenses,  review  your  assets  and   liabilities,  and  discuss  with  you  why   bankruptcy  does  or  does  not  make   sense  for  your  situation.    

When  you  are  evaluating   bankruptcy  as  an  option,   here’s  what  your   attorney  should  explain   to  you,  and  what  you   need  to  understand   before  you  decide  to  file:   A. B. C. D. 23

Unfortunately,  there  are  many   attorneys  out  there  that  care  more   about  their  best  interests  than  yours.     As  you  speak  with  an  attorney  about   bankruptcy,  be  careful  of  those  that:     A. Pressure  you  into  filing  when   you  only  wanted  to  gather   information  or  ask  questions;     B. Hastily  tell  you  that  you  have  no   other  option  but  to  file;   C. Do  not  or  cannot  explain  why   filing  makes  the  most  sense  for   you;   D. Do  not  or  cannot  explain  the   consequences  of  filing;  or   E. Disregard  or  belittle  your  other   debt  resolution  options.        

  How  bankruptcy  could  help  you   and/or  hurt  you;   Which  of  your  debts  will  be   discharged  and  which  will  not;   The  process  for  filing  and   completing  your  particular  case;   Any  potential  challenges  in  your   case.       Got a question about your situation or something you read in this guide? Feel free to email me at gboutwell@llgtn.com, call me at 615-807-1064, or visit my website at www.llgtn.com.


5 QUESTIONS TO ASK WHEN MEETING A PROSPECTIVE BANKRUPTCY ATTORNEY

 

5. HOW DOES YOUR PRACTICE DIFFER     FROM YOUR COMPETITION?   This  is  a  great  question  because  it   allows  the  attorney  to  talk  about  what   makes  them  special  and  unique.        

The  attorney  can  talk   about  what  they  value,   how  they  practice  law,   and  you  learn  more   about  them  as  a  person,   not  just  as  your  potential   representative.    

  You  can  hear  in  the  attorney’s  voice  if   they  are  excited  about  or  proud  of   their  practice.  What  you  can  gain   during  this  conversation  is  invaluable.        

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What  are  some  good  responses  to  this   question?     A. “I  strive  to  provide  the  highest   quality  service  to  my  clients.”     B. “I  treat  my  clients  the  way  I   would  want  to  be  treated  in  the   same  situation.”   C. “I  personally  answer  phone  calls,   meet  with  my  clients,  and  work   every  aspect  of  your  case  from   start  to  finish.”     D. “I  educate  my  clients  on  their   options  so  that  they  can  make  the   best,  most  well-­‐informed  decision   possible.”   E. “I  am  extremely  flexible  in   working  with  my  clients,  meeting   them  when  their  work  schedule   provides,  even  if  that  means  after   hours  or  on  weekends.”   F. “I  do  my  best  to  answer  emails,   phone  calls,  and  other  inquiries   within  twenty  four  hours.”      

Got a question about your situation or something you read in this guide? Feel free to email me at gboutwell@llgtn.com, call me at 615-807-1064, or visit my website at www.llgtn.com.


ABOUT THE AUTHOR

 

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GORDON BOUTWELL is  a  bankruptcy  and  consumer  

protection  attorney  in  Franklin,  Tennessee.    He  has   practiced  law  since  2006,  with  most  of  that  time   dedicated  to  bankruptcy,  personal  finance,  and   consumer  advocacy.         Over  the  years  he  has  helped  hundreds  of  individuals,   couples,  and  families  with  their  financial  problems.    He   believes  in  treating  other  people  the  way  he  would   want  to  be  treated  in  the  same  situation.    He  takes  the   time  to  get  to  know  his  clients,  and  he  educates  them   on  their  options  for  getting  out  of  debt,  helping  them  to   understand  and  evaluate  them.             He  believes  bankruptcy  is  a  worthwhile  tool  to  help   some  (but  not  all)  people  get  out  of  debt,  and,  when   combined  with  financial  education  and  counseling,  can   be  a  springboard  to  financial  independence.         Gordon  H.  Boutwell,  Atty   Lodestone  Legal  Group   In  March  2011,  Gordon  and  R.  Keith  Gordon  formed   198  E.  Main  St.,  Ste.  4   the  Lodestone  Legal  Group  in  Franklin  Tennessee,   Franklin,  TN  37064   with  the  purpose  of  assisting  business  and  private   615-­‐807-­‐1064   clients  by  exploring  legal  options,  navigating  the  legal   gboutwell@llgtn.com   pitfalls,  and  providing  measurable  results  through   www.llgtn.com   custom  solutions  and  a  commitment  to  the  lost  art  of     personal  care  and  client  service.     Lodestone  Legal  Group  practices  in  the  areas  of   bankruptcy,  debt  negotiation  and  settlement,  financial   counseling,  residential  and  commercial  real  estate,   estate  planning  (wills  and  trusts),  and  small  business   and  corporate  law.                         Got a question about your situation or something you read in this guide? Feel free to email me at gboutwell@llgtn.com, call me at 615-807-1064, or visit my website at www.llgtn.com.


Consumer's Guide to Bankruptcy