Bankruptcy should be used only as a last resort . It will have a severe impact on a credit rating and will remain on a credit report for at least ten years. Furthermore, bankruptcy is not a solution in all cases. Federal student loans, Federal tax debt and child support are all exempt from bankruptcy protection.

There are two types of bankruptcy typically filed by individuals, Chapter 7 and Chapter 13, with Chapter 7 being the most common. It is extremely popular because it provides for the absolute and complete elimination of most types of debt, thereby giving the debtor a truly fresh start. The goal of a Chapter 7 bankruptcy is to obtain a court order discharging one's debts. Chapter 13 is the second choice for individuals and it involves paying back your creditors under a court approved repayment plan. When filing bankruptcy, many times creditors will want to seize your property to pay off the debts, but federal and state laws provide you with some protections from this, known as “exemptions”. Figuring out your exempt property takes some time and effort, but it is to your benefit to take all the exemptions you are entitled to, therefore keeping as much property as legally possible. Every state has a set of exemptions in place for individuals who file for bankruptcy and many will allow the individual to choose either the state’s set or another set created by Congress which is called federal bankruptcy exemptions.

The following assets and property are exempt under the federal bankruptcy exemptions:

• Equity in your home, called a homestead exemption. Under the Bankruptcy Code, you can exempt up to $17,425 of equity. Some states have no homestead exemption; others allow debtors to protect all or most of the equity in their home.
• Insurance. You usually get to keep the cash value of your policies.
• Retirement plans. Pensions that qualify under the Employee Retirement Income Security Act (ERISA) are fully protected in bankruptcy. So are many other retirement benefits; however, IRAs and Keoghs are not.
• Personal property. You'll be able to keep most household goods, furniture, furnishings, clothing (other than furs), appliances, books and musical instruments. You may be limited to $1,000 in jewelry you can keep. Most states let you keep a vehicle with more than $2,400 of equity. And many states give you a "wild card" amount of money -- often $1,000 or more -- that you can apply toward any property.
• Public benefits. All public benefits, such as welfare, Social Security and unemployment insurance, are fully protected.
• Tools used on your job. You'll probably be able to keep up to a few thousand dollars worth of the tools used in your trade or profession.
• Wages. In most states, you can protect at least 75% of earned but unpaid wages.

*For a complete list of bankruptcy exemptions, visit the IRS Web site at www.irs.gov