Credit negotiations are not always successful, in which case you may be forced to seek bankruptcy protection. Once committed to filing for bankruptcy because of severe, crippling debt and hard-nosed creditors you will need to steel yourself for the tough road ahead. Bankruptcy can be a long, anguished process. Failure to do it properly can cost you a small fortunate and lead to federal investigation.
Your finances will be on public record
Your spending habits are a reflection of you personally, so get ready—you will have to attend a public questioning known as a meeting of creditors. Here, creditors will be free to ask you about your spending habits. Your spending habits and mistakes will be available for all to see, and you must answer freely and fully. Skeletons in the closet will be available for public scrutiny.
You must disclose your entire financial history
Failure to be completely honest regarding your financial life can get you in serious trouble. It may sound like an archaic practice of shaming, but bankruptcy courts contend that only the honest debtor should be discharged or his or her debt.
Discharge rulings have been lost where debtors have failed to meet the requirements of full credit history disclosure. In some cases, individuals have been investigated by the FBI for dishonestly or inaccurately disclose their financial history. Be prepared for a public tell-all.
Only you are discharged of the debt
This process doesn’t make the debt disappear. If you share a debt with someone—like a mortgage with a spouse—they are still on the hook. Failure to discuss bankruptcy in such a case can leave someone you care about with a huge financial burden.