State Laws

• Generally, you must have lived in a state for at least two continuous years prior to filing Chapter 7 to take advantage of asset exemption laws, notes the website Bankruptcy Action. Asset exemption laws allow you to keep at least some of your property even if you must file bankruptcy on your bills. If you can claim Texas asset exemptions and your boat is worth less than $30,000 as of 2011, you can probably keep the property. On the other hand, if you live in West Virginia you cannot keep a boat worth more than $1,000. If the boat exceeds the limit, bankruptcy court officials will sell it to offset the financial losses of your creditors.
  
  

Chapter 7 Income Qualification

• If you make more than your state's annual median income level, you must apply for special permission to file Chapter 7. The application, handled through your local bankruptcy court, requires you to prove that you cannot partially repay your creditors in Chapter 13 while supporting your family. As of 2011, the annual median income figure for a single California resident was $48,009, while the yearly level for a family of four in New Jersey was $101,106, according to the U.S. Trustee Program.
  
  

Additional Procedures

• You must get credit counseling before declaring Chapter 7, and then complete another session before a judge will discharge your debts, notes the Federal Trade Commission. Once you file Chapter 7, a bankruptcy trustee can demand you turn over any assets not covered under your state's asset exemption laws, including your boat. The trustee then sells the assets and distributes any proceeds to your creditors. Also, you must attend a "341 meeting," during which your creditors can object to your bankruptcy case filing. If you do not have an attorney, you also must attend a discharge hearing during which a judge will accept, amend or deny your Chapter 7 request.
  
  

Ineligible Debts

• If you charged up credit cards and took out loans knowing you could not repay them, you cannot include them in your case, warns "How to File for Chapter 7 Bankruptcy." You cannot discharge child support, alimony, court fines and lawsuits resulting from your illegal activities. Nor can you eliminate your obligation to repay tax bills incurred less than three years prior to your Chapter 7 case filing. In rare cases, a judge may discharge your federally issued student loans if you prove a serious disability or a situation such as your college closing its doors.