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When you file for bankruptcy, all you property (real as well as personal) automatically goes in possession of "bankruptcy estate". However, you can legally keep the property that you claim as exempt from bankruptcy. For this you need to fill the "property claimed as exempt form" which is considered only after the "property exemption report" of the bankruptcy estate trustee. This report demarks your property as exempt or non-exempt. After this report the trustee can take physical possession of your property.

The bankruptcy estate trustee is now entitled to sell your non-exempt properties to pay your creditors on pro-rata basis. You can keep only your exempt property. After the bankruptcy court discharges you, you are released from the debts forever excepting those that are non-dischargeable. Bankruptcy brings end to the businesses. The failing business assets are liquidated and distributed amongst the creditors on pro-rata basis. However, in case of individuals, they are allowed to keep certain personal possessions, tools of trade and household furnishings of minimal value not more than the exemption value amount. Rest of the non-exempted asset goes in the paying of the debts if they exceed Federal statutory exception amount.

When you file for bankruptcy and seek property exemption both the federal and the state governments offer bankruptcy exemptions. While some states allow you to choose between the federal and the state exemption laws, the other states may not allow this. Also you cannot mix and match between the two bankruptcy exemption laws.

Now, a very important question is how do you value you assets and decide which one you want to get exempted. In such a case it is advisable to get professional help. These professionals are well experienced and adept at valuing assets. However, beware that if you intentionally undervalue or misrepresent asset value you might just be running for a big bankruptcy crime under punishable law. Bankruptcy personal loans may help you save more of your assets from non-exemption. Though it will be difficult because this will be a high risk borrowing yet it might just help you get over with the bankruptcy perils.

Summary: When you file for bankruptcy all you property, real as well as personal, goes automatically in possession of "bankruptcy estate". Trustee of this bankruptcy estate file a property exemption report marking your property as exempt or non-exempt. Non-exempt is sold to pay back creditor on pro-rata basis and you are allowed to keep the exempted property.