How bankruptcy actually works

I was reading the thread on celebrities going "bankrupt" and some people in there seemed to not know how it actually worked, so here you go

There are two types of bankruptcy for individuals. Chapter 7 and Chapter 13.

The Bankruptcy Code will allow the debtor to keep certain exempt property, but a trustee will liquidate the debtor's remaining assets. (Chapter 7 bankruptcy)

In Louisiana, exempt assets include:
Living room, dining room, and bedroom furniture; clothing; chinaware, glassware, utensils, and silverware (but not sterling); refrigerator, freezer, stove, washer and dryer; bedding and linens; family portraits; musical instruments; heating and cooling equipment; pressing irons and sewing machine; arms and military accoutrements; poultry, household pets and 1 cow; engagement and wedding rings up to $5,000; disaster relief insurance proceeds; one motor vehicle up to $7,500; one motor vehicle modified for a person with a disability up to $7,500; guns and ammunition up to $2,500.

Property you occupy up to $35,000, but cannot exceed 5 acres if the residence in a municipality, or 200 acres if not located in a municipality

Tax exempt retirement accounts (including 401(k)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and defined benefit plans)

IRAS and Roth IRAs to $1,283,025.

insurance benefits

Public benefits including workers compensation, unemployment compensation, tax credits, crime victim compensation

Tools of trade such as tools, books, equipment, and 1 utility trailer or work

Property owned by a minor

A chapter 13 bankruptcy is also called a wage earner's plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years. If the debtor's current monthly income is less than the applicable state median, the plan will be for three years unless the court approves a longer period "for cause." (1) If the debtor's current monthly income is greater than the applicable state median, the plan generally must be for five years. In no case may a plan provide for payments over a period longer than five years. During this time the law forbids creditors from starting or continuing collection efforts.

By filing under this chapter, individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time. Nevertheless, they must still make all mortgage payments that come due during the chapter 13 plan on time. Another advantage of chapter 13 is that it allows individuals to reschedule secured debts (other than a mortgage for their primary residence) and extend them over the life of the chapter 13 plan. Doing this may lower the payments. Chapter 13 also has a special provision that protects third parties who are liable with the debtor on "consumer debts." This provision may protect co-signers. Finally, chapter 13 acts like a consolidation loan under which the individual makes the plan payments to a chapter 13 trustee who then distributes payments to creditors.