Filing for bankruptcy is a personal matter, and you don't owe anyone any explanation as to why you made this decision. However, there may be a time or two that explaining your reasons to potential lenders are beneficial. Here, our bankruptcy lawyer explains what information you may want to include in a bankruptcy letter, which can provide some insight as to your situation to entice a lender to take a chance on you.
Offer an Explanation
The purpose of a bankruptcy letter is to provide future creditors certain information about the mitigating circumstance that led to your damaging credit history. This can include unexpected medical bills, the death of an immediate family member, or a job loss. The circumstances are generally things that are unlikely to happen again. Certain credible reasons can sometimes help when you’re trying to obtain funding after a foreclosure or bankruptcy.
One advantage of writing such a letter is that you may be able to obtain a mortgage before the average time period expires: For a Chapter 7 bankruptcy, that time period is five years. Writing a letter explaining your financial troubles may reduce the wait time to two years. Private lenders are harsher when it comes to looking at someone with less-than-stellar credit, and they need to be confident that you're worth the risk.
During the timeframe between filing for bankruptcy and qualifying for a mortgage, you may need to consider rental properties. Bankruptcy can sometimes make renting difficult. A similar letter addressed to the landlord or property manager can increase the chances of getting you into a rental unit.
For more information on filing for bankruptcy, contact us today.