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.”