Daniel A. Austin, North­eastern Uni­ver­sity School of Law 

What are bank­ruptcy exemp­tions, and how do they work.  People tend to ‘know’ that debtors can usu­ally file per­sonal bank­ruptcy and keep their prop­erty, but most debtors have no idea how this hap­pens before they meet with their attorney.”

Most impor­tant: do not try to cope with debt by cashing in retire­ment assets.  As for timing, there are at least two sit­u­a­tions where the debtor should file fairly promptly.  First, when facing a home fore­clo­sure where the debtor has suf­fi­cient income to pay the mort­gage (include catch up on arrear­ages, if applic­able) if his/​her non-​​priority unse­cured debt is dis­charged AND it makes eco­nomic sense to remain in the home.  Second, where the debtor’s non-​​priority debts are dis­charge­able and dis­charging the debt would allow the debtor pay his/​her post-​​bankruptcy bills in full and on time.

Let me also add: Many debtors have stu­dent loan debt.  It is pos­sible that the debtor lives in a juris­dic­tion where judges permit favor­able treat­ment of stu­dent loan debt in chapter 13, or the debtor’s cir­cum­stances would appear to meet the test for dis­charge of stu­dent loan debt.  In these fairly rare cir­cum­stances, and assuming the debtor sat­is­fies the other require­ments for bank­ruptcy, then filing bank­ruptcy to dis­charge stu­dent loan debt might be some­thing to seri­ously consider.”

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