What Is a Bankruptcy Explanation Letter?
A Bankruptcy Explanation Letter is a written document drafted by a prospective borrower and sent to a financial institution that has requested information about the bankruptcy they have discovered in the credit record of their client. If the lender is reluctant to offer you a loan or issue a credit card because in the past you have declared yourself bankrupt, it is your responsibility to explain the reasons behind your insolvency.
Additionally, you can prepare your Letter of Explanation for Bankruptcy in advance before the lender finds out about the bankruptcy - it may be better to show you are not hiding anything from the bank or mortgage company to build trust in your relationship.
Bankruptcy Explanation Letter Types
- Generic Bankruptcy Explanation Letter. Customize this template to fill in all the necessary details regarding your bankruptcy - explain why you could not manage your debts, did not have a regular source of income, or failed to make loan or mortgage payments on time. Demonstrate to the potential lender you have been living within your means and another bankruptcy is highly unlikely.
- Sample Letter of Explanation for Bankruptcy. You may refer to this template when composing your own letter to the mortgage company that provided you with the funds for your residence - introduce yourself, record the circumstances that led you to declare bankruptcy months or years ago, confirm your current financial situation has changed for the better, and enclose documentation that proves your point - for instance, a bank statement or a copy of your employment agreement.
Check out these related templates:
Use this letter template to explain why you had to file for bankruptcy when you are applying for a loan with a financial lender.