Under Chapter 7 bankruptcy laws, debts that can be discharged are what are called unsecured debts. Individuals who file in federal court for Chapter 7 bankruptcy (considered to be a “straight bankruptcy” or liquidation) are entitled to keep certain essential properties, i.e., car, furniture, etc. As each state has different rules regarding what those essential properties are, and what consumer debts are covered, the individual debtor has the option of choosing between a federal package of exemptions or the state package of exemptions. Because of these differences, it is usually easier to say what is not covered under Chapter 7 bankruptcy laws than to specify all of what is covered.

According to the U.S. bankruptcy laws, exemptions from these proceedings include: child support, income taxes (less than three years old), property taxes, most student loans, fines and restitution imposed by a court for any crimes committed by the debtor, and spousal support.

Although Chapter 7 is the most common form of bankruptcy, it is not the only form. For more information or to see if you qualify and what the steps to claim bankruptcy are, check out these resources:

-- Total Bankruptcy: http://www.totalbankruptcy.com/

-- Internal Revenue Service:  http://www.irs.gov/irm/part5/ch09s06.html

-- U.S. Bankruptcy Court: http://www.uscourts.gov/bankruptcycourts/bankruptcybasics/chapter7.html