A consumer who has gone through bankruptcy may want to write a bankruptcy explanation letter to a previous creditor or a new creditor. He or she may want to reduce their waiting time for a Federal Housing Administration (FHA) loan from five years after filing bankruptcy to two years, or they may want to explain to a lender why they are suitable for approval for a loan. Some people write a bankruptcy explanation letter to apologize to the creditors who lost money because the consumer declared bankruptcy.
Even people who file bankruptcy need credit. Sending an explanation letter to potential creditors may make the difference between getting a loan or for credit approval. The consumer has a better chance of getting credit if they have a steady income and have made regular payments for at least six months. Here are some tips for writing a bankruptcy explanation letter:
• Why the consumer filed for bankruptcy. This informs the potential creditor that the reason was unavoidable and not because of carelessness. It will also help the creditor see that the cause of the bankruptcy will not occur again. The consumer can talk to a credit counselor to understand how they got in debt and work out a plan so it will not happen again.
• The information in the letter should be honest and straightforward. It will not help the consumer to lie about his or her financial situation or to hide the reasons. Along with the truth, the consumer can give a plan on how they will make payments on the new loan.
• Before sending the letter, the consumer should make sure their credit report is accurate. They can contact the credit bureaus for a copy of their report and examine it for any incorrect information or debt. If there is inaccurate information, they should first write a letter to the credit agency to ask that the information be changed. If the agency refuses to do this, the consumer can request that a note be added to the report stating that the debt is in dispute. The consumer can also mention any discrepancies in their credit report when they fill out an application for credit.
Some consumers want to tell their creditors why they had to file for bankruptcy to explain why they could not pay the bills they promised to pay when they got the loan or credit card. Some of the reasons for sending this type of letter are:
• To apologize for not paying the lender back, even though filing for bankruptcy is legal. While this may not satisfy the lender, it may make the borrower feel better.
• To offer to repay all or part of some loans. To file for bankruptcy, the consumer must list all of his or her debts, but after completing the process, they may want to repay a friend or caregiver who helped during a difficult period.
• To establish new credit by telling a potential lender why they had to file for bankruptcy and how they will not get into that situation again.
• To get a job. Some employers may wonder about the stability of a person who filed for bankruptcy. If the applicant sends an explanation letter, they may have a better chance of getting the job.
By Andre Bradley