I have taken someone through bankruptcy so I can tell you the processes first hand (in England).
Courts often ask if you have sought independent financial advice on your situation. Often this can be obtained free, I contacted my local 'official receiver' and they gave me a number of someone who sat down with person in question, worked out their income and expenditure, then gave advice on completing the form itself (it can be quite an intimidating form as if you don't get it right your friend can be refused bankruptcy).
Find your nearest official receiver via this website:
The Insolvency Service Website
Then you need the fee. I believe it is around £600, a few pounds more for London because you go to the High Court here. You often don't see the judge and it is an administrative process above anything else to check the judge is happy with your form and willing to grant bankruptcy.
You'll have a call with the official receiver the same day, sometimes in an office at the court, sometimes at home later on. They go through the finer details, including telling you what to do if you get income that is unexpected and not known about at the current time, your bank accounts will be frozen so you must seek their permission to open another bank account. Currently the two main ones you can have are either Barclay's basic account or the Co-Op 'Cashminder' account, most other banks turn down bankrupts. You can open these accounts on the same day once you have permission from the receiver, some people open them early but practically it may be better to open post bankruptcy to ensure the new account isn't accidentally frozen.
Your name goes on the Insolvency Service website where it can be searched by anyone. It shows your name, address, date of birth, occupation and date of bankruptcy. It also shows if it is bankruptcy or IVA and if you have a repayment order too. It is also published in the London Gazette (a legal paper of notices) and as the Gazette is online this entry is never deleted. The Insolvency website however changes status to 'discharged' following your discharge and then deletes your info three months afterwards.
The receiver will also tell you if they think you have more money than your basic living requires and will set up a repayment plan to take this extra cash, another reason why it is important to fill your application in well as if you forget to account for an expense then the money may appear 'surplus' and you'll have a repayment order made. Your friend will also go on a nil tax code and you then pay another company (usually Moon Beaver) your tax.
Then any companies who pester you, you take a photocopy of your bankruptcy paper and send off a letter to their head office to say you went bankrupt on x date, refer any creditor issues to the official receiver and do not contact you again (some companies try the moral stance 'wouldn't you feel better knowing if you paid us... but this is illegal to ask once you have told them to deal with the receiver and not to contact you again, if a particular company persists tell the official receiver as they are usually on your side in this case).
You are then normally an undischarged bankrupt for a year. Sometimes you get 'early discharge' so the receiver concludes all your affairs can be released but you cannot apply for this, they decide for you. Once you are discharged, you start cleaning up your credit file. You apply to the credit reference agencies for your reports, and then you check for any outstanding balances. You then write to these companies after your discharge to state they must mark the files as 'settled' or 'part settled' and demonstrate no money is outstanding (include a copy of your original court notice too - I didn't mention earlier you can request a formal notice which the court charge for, in this scenario though all companies eventually sorted things with just a photocopy of the original court paper declaring the bankruptcy and a print from the Insolvency Service website). Some companies play hardball and you may end up writing to their executive office. I found Lloyds TSB to be reasonable, Capital One again, but then on the other end of the scale Santander was hellish and initially refused to update any records (to cut a long story short, four months of correspondence with them, a couple of calls to the receiver and some threats of court action resulted in everything being sorted, an apology and an expensive looking hamper as way of saying sorry).
You must know that household insurers often have to know about the bankruptcy. Not all, but quite a lot ask the question 'have you, or ANYONE living at your house, ever been declared bankrupt?' If you don't declare this, their loss adjusters routinely scan the London Gazette as a quick way to invalidate claims. You'll find it is difficult to get a cheap comparison online for insurance from then on as once you tick the box about bankruptcy only a few quotes come in which are expensive. Way around this is not to tick the box, get a quote, then before you pay you phone them and declare the bankruptcy. 9 times out of 10 they will say 'fine' but if you don't tell them it will be a problem should you make a claim.
Once you are discharged your credit rating immediately improves as all those bad debts you can get marked as settled, but the bankruptcy stays on file for six years following the court date. After that, generally the only other time you will be asked about bankruptcy (besides insurance) is for significant financial milestones - mortgages for instance. Most credit cards and banks etc don't ask about it and when they do their credit checks after six years they wouldn't find out through their routine checks.
This is a hugely long post but I know a great deal about this. I would say a couple of comments though. It is not an easy way out. There is a lot of paperwork. There will be tears. You have to find the money to go bankrupt and if you have no money that in itself can be hard. Your name is published for all to see in the London Gazette forever (although until a couple of years ago it used to go in the local paper too which was far more embarrassing for most, this has since stopped). My message is really that your friend shouldn't go bankrupt unless there is no other way out, and equally other FM's on this thread should respect this position that it is desperate and not make judgments.
This website is also essential reading:
http://forums.moneysavingexpert.com/forumdisplay.php?f=136
