Bankruptcy can happen fast — when a person is successfully sued or when unexpected medical expenses run up. Or it can happen in slow motion, when a business fails or long-term unemployment makes it impossible to keep up with bills. No matter how a person gets to the point of considering bankruptcy, the worst thing about it is the unknown.

The biggest bankruptcies ever
What really happens to you when you file for bankruptcy? What do you have to do? How do you survive afterward?

Four real people, Michael, Robert, Robin and Andrew, shared their experiences going through bankruptcy. (Only Robert allowed us to use his real name.)

Robert Nickell, a pharmacist and chairman of the Nickell Group, filed for bankruptcy in 1999, when he was 39. He lost his business, a pharmacy in Manhattan Beach, Calif., after accumulating more than $600,000 in debt then going through a protracted divorce.

Robin, 31, thought she was covered by health insurance when she spent a week in the hospital after a car accident. She was mistaken. She was already in debt from starting a freelance copy-editing business; with the hospital bill, her debts topped $65,000. Then she lost her job. That was the last straw.

Michael practiced medicine in Oregon for 45 years. He filed for bankruptcy at age 72, when he could no longer work and had no savings to fall back on. He was going through a divorce at the time as well. He owed about $50,000 in back taxes, medical bills and business debts.

Andrew, 36, and his wife, Ashley, 35, owned a retail company in Colorado that sold wireless products, telephones and satellites. They had a great run with it, but between a merger and employee theft, they ran up about $300,000 in debt. They filed for joint bankruptcy two years ago.

Some aspects of bankruptcy weren’t as bad as they thought they would be. Other aspects were worse. Here’s how it went:

The buildup: How did I get here?
Robert, Robin, Michael and Andrew all found themselves sliding into the circumstances that led them to choose bankruptcy.

Michael had barely broken even in his medical practice for years. He had planned to work until he died, but health problems forced him to retire. His phone rang constantly as creditors sought him out. Eventually, he quit answering it. Bills were stacked all over the office; he stopped opening them. He had given up long before he actually filed for bankruptcy.

Robin had been earning $50,000 a year at a dot-com company. One day, she came to work and was handed a box and a paycheck and told, “This is your last day.” Robin moved back to her hometown and quickly found a job. She thought she was getting back on top of things, chipping away at her debt.

Then she was hospitalized, which ended her new job. She could put only a little toward the hospital bills. Living on $1,000 per month in unemployment “gave me a whole new way to look at possessions,” Robin says. But cutting back wasn’t enough to cut it. Within a few months, her debt was turned over to collection agencies.

Robin hated the phone calls the most. Her father advised her to not answer the phone, but even checking messages stressed her out. Most callers were friendly, but a few were ugly. “One in particular really berated me and said, ‘Did you think you could spend this money and not pay it off?’ It really upset me because I already did feel guilty.”

Robert says, “Pre-bankruptcy is one of these very scary things where you can’t believe that you got into this mess.

“I would be in my apartment, and somebody would knock on my door, and I’d want to climb out the window because I was avoiding the process servers,” Robert recalls. He likened it to the stages of grief. “You’re in denial — you can’t believe this is happening to you. Then there’s acceptance. Serve me papers, bring it on; I’ll put it in the pile with all the rest of them.”

Andrew and Ashley, who worked at their company while raising three small children, fought for more than a year to overcome their debt load. They put a lot of money into the business, which eventually failed. “We used every resource to keep it rolling,” Andrew says. Meanwhile, an employee helped himself to between $10,000 and $15,000 from the till.

Andrew spoke with a couple of attorneys to see if he could renegotiate with creditors or get extensions. But the creditors weren’t interested: “Creditors in general will not work with you if you have been making payments on time. They’ll say, ‘No, call us when you’re delinquent.’

“The ball got bigger and was rolling down the hill,” Andrew says. “There was lots of fear of the unknown, which I think is a big part of the bad piece. You don’t know how it’s going to end up, if you’re going to keep your cars or your house, or how drastically your lifestyle is going to change.”

Filing for bankruptcy
Michael first went to a lawyer to talk about filing for bankruptcy. The lawyer determined that although Michael had very little cash, he had assets he could sell. The lawyer advised Michael to sell enough assets to pay off his debts or at least keep up the payments.

That’s not what Michael wanted to hear. By then, he wanted all his debt to be gone — quickly. He was angry at the lawyer for refusing to help him file for bankruptcy. So Michael found a paralegal through a newspaper ad. The paralegal told Michael to stop making all payments and agreed to start bankruptcy proceedings.

Robin tried a couple of credit counseling agencies, but when they heard her numbers, they told her there was nothing they could do. Finally she went to a local bankruptcy attorney who charged a flat rate. She brought as much information as she could pull together and told the lawyer her story. The lawyer advised Robin to cash her next paycheck (by then Robin had a new job) and spend it — restock the refrigerator, fill the car with gas, pay the rent — because any cash assets on the filing date are considered available to pay creditors.

“The lawyer and her staff were so, so kind,” Robin says. “They made the process as easy as they could.” Best of all, the collection calls stopped. “As soon as you contact a lawyer, the lawyer takes over and (debt collectors) can’t call you anymore. I remember that being the biggest sense of relief.”

Andrew, on the other hand, had been working with his attorneys to find a way not to go bankrupt. Eventually, time ran out. “I sat down with the attorneys, and they said, ‘This is what you’re going to have to do,’” he recalls. Ashley wasn’t at that meeting; she found out later that she would have to file for joint bankruptcy.

Bankruptcy didn’t feel like an easy way out to Andrew and Ashley, what with the cost — $5,000 in attorney’s fees — and the time. “Attorneys get all your financial information — every debt, every creditor, every bank statement, valuations on your cars, properties and assets,” Andrew says. “It’s way worse than getting a home loan, way more information.”

Andrew and Ashley’s joint bankruptcy hearing was set for three months after the filing date, and they were instructed not to make any more payments on their debts. “We went from never, ever missing a payment on anything, to the next day you stop paying everything. Which doesn’t seem logical,” Andrew says. (People who file for bankruptcy generally are advised to stop making debt payments for several reasons: They don’t yet know which debts will be discharged, payments to certain debtors may be regarded as preferential, and they’ll need any cash on hand to pay legal and court costs.)

They didn’t have anything to pay bills with anyway, after covering the legal fees. Andrew and Ashley were now unemployed — and, having been self-employed, they did not qualify for unemployment benefits.

The hearing
Bankruptcy proceedings are filed in U.S. Bankruptcy Courts, which are divided into 94 federal districts. The court sets a hearing date to walk through a petitioner’s file and give creditors an opportunity to speak or to protest.

Michael’s health problems made it difficult for him to get to his hearing. After twice missing scheduled hearings, he finally made it to court with the help of a friend. The hearing was in a plain room of the courthouse set up with folding chairs. He could hear the cases ahead of him as he waited for his turn, just as the other people waiting could hear his case.

A court-appointed trustee sat at a small table with a tape recorder on it, and Michael sat on the other side. Several of Michael’s creditors or their representatives were at the hearing, but they did not speak directly to Michael, and Michael was not given an opportunity to say anything to them. There was no judge — only the trustee taking notes. The case was settled weeks later by mail.

Robin was given a court date, and her lawyer was there with some other clients. Robin watched the judge interview the couple before her, which helped her prepare. Even though Robin’s hearing lasted only about 15 minutes, it was hard for her. She said she felt she had to justify what had happened, though she hadn’t done anything frivolous or malicious. She told the judge that she certainly never intended to not pay the money back. Her case was held open until she finished paying back the $2,400 of debt not erased in the bankruptcy.

Andrew and Ashley’s hearing also lasted 15 to 20 minutes, because there were no red flags on their files except an expected tax refund. The discharge was postponed until the trustee saw and verified their tax refund, and then they had to turn that money over. The whole process took six months: They filed in November and received their discharge in May.

Andrew’s creditors didn’t attend his hearing, but there were plenty of other people in the room — staff, people waiting their turn, observers. “It’s a very public display of your failure,” he says. “That was not a fun day.”

Robert’s hearing, held in a “plain, ugly government room,” wasn’t as scary as he imagined. “You have the fear that someone is going to stand up and make you look like a criminal,” he says. But his creditors didn’t show.

The judge had more information than Robert realized, and Robert was glad he hadn’t tried to hide any assets. The judge asked about the pharmacy Robert owned, but Robert had sold each item for $1 and had already given the proceeds to his wholesaler. (Yes, it’s legal.) “The sale was on Sunday; the court hearing was on Monday.”

The case went quickly for Robert. “He let me keep my Suburban, and then he basically banged the gavel and said, ‘Done.’ I walked out and got in my Suburban and restarted my life.”

Robert was lucky. His debts were discharged at the hearing; he kept his car and moved on.

Michael’s debts fell into three categories: debts he didn’t owe after all (some turned out to be his ex-wife’s responsibility), debts that couldn’t be discharged (such as taxes and a mortgage) and dischargeable debts. When Michael’s nonresidence real estate was sold months later, his creditors received almost 100% of what they were owed from the proceeds. The bankruptcy proved to be expensive, unnecessary and counterproductive.

Robin — as in all bankruptcy cases — had had to do an inventory of everything she owned, down to the books on her shelves, and estimate how much she would get for it all at a garage sale. She later got a notice from the court saying the judge wanted her to sell $2,400 worth of her possessions — including her mother’s diamond earrings — to pay some of her debts.

Robin’s mother had died a few years earlier, and Robin couldn’t bear to part with the earrings. “You can’t go back and say, ‘You can have everything but the earrings,’” she says. But the judge let Robin pay off the debt in installments of $200 a month, and Robin got to keep her things.

She also was able to keep her car. In some states, that’s automatic, but not in Louisiana, where she lived. Embarrassingly, Robin had to ask her employer to write a note saying she must have a car to get to work. (Her boss was understanding.)

Andrew was given an allotment for the value of cars, house and personal property he could keep. His personal property allotment was $6,000 for the household, but, he says, “that $6,000 goes farther than you think.” That’s because the items — furniture, sports equipment, jewelry, kids’ stuff, computers — are valued at fire-sale prices.

All this time, he and Ashley were still juggling bills. Their credit was cut off. At one point, their water was cut off, too. But in the end, except for some payroll taxes, they got a full discharge. They were finally done.

Michael died soon after his bankruptcy was settled.

It didn’t take Robert long to get his credit back. He found a Capital One credit card with a $500 credit limit and paid it off daily or weekly until he built the limit up to $1,000. “I still use their card today,” he says. From that point, over eight years, Robert has worked to build up his credit and his business.

“I was able to get credit cards within a month of filing for bankruptcy. The next time I bought a car, I got a loan.” He may have paid higher interest, but he paid it off quickly. “I have a house today,” he says.

One of the disappointing things for Robert: American Express took away all his travel points. For a struggling businessman, that hurt.

Ten years later, Robert is doing fine. He sold his rebuilt sports pharmacy, SportPharm, last year. “The bankruptcy is off my (credit report) now, and I’m in the high 700s (for a credit score). I was able to show a perfect record after the bankruptcy,” he says. More importantly, Robert realized that nobody could take his brain, his passion or his drive.

“I don’t think I will ever be in that position again,” says Robert. “You burn your hand on the stove; you won’t get that close again.

“I would have done something different in that six-year period before the bankruptcy. I’m completely consumer-debt-free. I’ve learned a different way to operate.”

His next goal: getting a black American Express card.

Robin had lingering feelings of guilt after the bankruptcy, especially toward one doctor’s office where the nurses and doctors had been so kind. (In bankruptcy, you don’t choose which creditors get paid.) Robin lived on cash for several years, terrified to get a credit card. She started getting preapproved credit card offers immediately after the bankruptcy, with high interest rates. “Your bankruptcy worries are over — start rebuilding your credit,” the envelopes would say. She later learned that credit card companies buy lists of people who have just completed bankruptcy.

Robin started with a debit card for emergencies and traveling, then got a credit card she scrupulously paid in full each month. Today, she’s close to the 10-year mark, when the bankruptcy will come off her credit record. She has bought a house, and her credit score is up to 720. She’s grateful she was able to file for bankruptcy when she could see no other alternatives, and she no longer feels guilty.

When Andrew’s bankruptcy was finalized in May 2008, it was a step toward a new life. He credits support from the Entrepreneurs’ Organization, the Pinnacle Forum and a strong family with helping him get through the ordeal.

“The whole thing puts everything you are made of through the fire: your identity, your marriage, your faith, your friendships, it all goes through the fire, and certain pieces of all of it don’t make it through,” he says. “You find out what’s real in your life and what’s not real. Anything that makes it through comes through stronger.”

Andrew’s credit is still in tatters, and he knows he’ll have to pay a much higher interest rate on any car loan. He likely won’t own a house for years.

But he says the bankruptcy created a blank slate. Now Andrew helps others grow their businesses while avoiding some of the mistakes he made. Ashley is staying home with their three small children. “We could rebuild it the way we really wanted to live our lives,” he says.