The short answer to this question is "no," but as an informed consumer, you probably want more information than a simple yes or no. As a bankruptcy lawyer, I can do that for you. A Chapter 7 Bankruptcy is often referred to as a liquidation bankruptcy. This is because the bankruptcy trustee will take possession of all of your non-exempt assets, liquidate those assets and pay your creditors the proceeds from the sale. The key here is your exempt assets. Determining which of your assets are exempt and which will be subject to the bankruptcy trustee will differ from case to case and state to state.

Bankruptcy law is a Federal Law and is governed in a Federal Court, but each state has its' own unique rules that govern how a Chapter 7 bankruptcy is handled and what allowable exemptions a creditor make use and not use. For example, in Florida a person is allowed to exempt their primary residence. This means that if a debtor that owns their home outright files for bankruptcy, the bankruptcy trustee will not be allowed to take possession of or force the sale of their home. Florida does not have a maximum dollar limit on the amount of equity in a person's homestead. Most states allow for a home exemption, but few have an unlimited equity dollar exemption in their primary house.

Generally speaking most retirement accounts, cash value life insurance, annuities, and pension plans are fully exempt during a Chapter 7 bankruptcy. This is fairly standard across the states. There are exemptions for automobiles along with many other assets. Because the use of your exemptions is a large part of filing a wise Chapter 7, it is vital that you seek the help of an experienced bankruptcy attorney. What might be the best use of exemptions for Tom, will not be the smartest avenue for Bob to take.

This leads into another very valid point about seeking guidance from an experienced bankruptcy attorney. When you first meet with your attorney they will want to know everything they can about your assets. It is at this point they will be able to advise you on what steps you should take and what steps you should avoid if at some point in the future you need to file for bankruptcy. Never withdraw money from your retirement accounts to pay an unsecured creditor such as a credit card company. You are taking money out of an account that will be not be part of the bankruptcy to pay down a debt that will more than likely be discharged during bankruptcy.