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Bankruptcy Explanation Letter Template
What Is a Bankruptcy Explanation Letter?
A Bankruptcy Explanation Letter is used to explain why you had to file for bankruptcy when you are applying to a financial lender for a mortgage, loan, credit card, or another money-lending service. You can download a printable Bankruptcy Explanation Letter template via the link below.
The Letter of Explanation for Bankruptcy is designed to allow you to explain why the bankruptcy occurred, how you resolved it, and why you are a safe investment now.
You will also want to include any bank or financial statements (both from the time filed for bankruptcy to your most recent statements) to show that you have turned around your financial situation and have since been living beneath your financial means. If the bankruptcy was due to medical expenses, job loss, or any other event outside of your control, you will want to include documentation of these events to further support your situation.
How to Write a Bankruptcy Explanation Letter?
A Letter of Explanation for Bankruptcy is your chance to describe in detail why you had to file for bankruptcy and how you have since worked to improve your financial stability. Many lenders will take these letters into consideration when evaluating an applicant, so it is important to be open and honest about your situation.
- You will want to start your Bankruptcy Explanation Letter by clarifying what type of bankruptcy you filed for, when you filed, and a quick introduction to why you had to file for bankruptcy. You will also want to explain the additional documentation you are providing to the reader.
- Once you have laid out the background, you will then want to talk about how you fell behind financially and if you tried to remedy the situation (using credit cards to pay bills, relying on friends or family for money, working additional jobs, etc.). It is important to paint a picture for the financial representative reading your letter to understand what happened and how you have or will plan to fix the situation and rebuild your credit.
- You will then want to talk about what has changed in your situation since that point and what you have done to improve your financial standing (finding a new job or spending far below your means). You will also want to explain your current financial situation based on the documentation you provided and be honest about any debts you may currently have.
Keep in mind that if you have filed for bankruptcy multiple times, this will come across as a pattern of behavior, rather than a one-time misfortune, and make it less likely that the lender will view your case favorably.
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