Basics

• Individuals, married couples and such entities as corporations and partnerships can file for Chapter 7 bankruptcy protection. According to the United States Courts website, Chapter 7 is a liquidation bankruptcy. Liquidation is the sale of your property and distribution of the proceeds from that sale to your creditors. Not all property, however, is liquidated. You can keep some assets, such as your home, if they are "exempt" from liquidation.
  
  

Exempt Property

• Generally speaking, you can keep the following types of property, which is considered "exempt": Vehicles, home goods and furniture, clothes, appliances, jewelry, the tools you use for your profession or trade, and wages that you have earned (but haven't been paid to you) after the proceeding began. You can also keep any benefits are receiving, including Social Security and welfare, as well as any damages you may have received as the result of a personal injury lawsuit. There are many stipulations involved with the aforementioned exempt property. FindLaw reports that vehicles can't exceed a certain value and jewelry, clothes and furniture must be deemed "reasonably necessary."
  
  

State Distinctions

• In general, bankruptcy laws are the same no matter where you live, according to Moran Law Group. The only time these laws may differ, according to the group, is with regard to what property is considered "exempt." If there are any conflicts between the state and federal laws, the federal law always trumps the state legislation, according to Moran Law.
  
  

Comparison

• You can also consider file for a Chapter 13 bankruptcy, which is another common form of bankruptcy. Instead of liquidating your assets and wiping away your debt, a Chapter 13 bankruptcy enables you to establish a repayment plan with your creditors, and repay debt over three to five years. Not everyone is eligible for this option; you must have a steady income and your secured and unsecured debt must not exceed a specified dollar value.
  
  

Stipulations

• If you opt to go through a Chapter 7 proceeding, not all debts can be erased, according to Nolo. Debts that you'll still have to pay back, even after your case is closed, include any child support you may owe, as well as alimony and some types of taxes. For the most part, you'll also continue to owe any student loan debt -- though in rare cases you can demonstrate that such expenses are causing undue hardship and have that debt eliminated as well, Nolo reports.
  
  

Warning

• Filing for Chapter 7 should never be taken lightly. According to the Federal Citizen Information Center, an arm of the government's General Services Administration, a bankruptcy is noted on your credit report -- and remains on your report for a decade. During that time, you may have trouble securing financing to get a car, a home -- or you may even have problems getting a job, according to FCIC.