A bankruptcy explanation letter does not have to be particularly long or detailed. In fact, it is preferable to keep things precise and to the point. Whoever ends up reading the letter does not necessarily need a minute-by-minute account of what happened.
Stick to big-picture events like the loss of your job or a medical emergency that resulted in your need to declare bankruptcy.
Above all, keep in mind that this is a formal business letter. It is best to use proper formatting and to compose the letter on a computer so that it can be printed on good-quality paper. Alternatively, you may be asked to email your letter.
Send it as an attachment or stick to proper letter formatting in the email that you send. Check for errors in spelling, grammar and punctuation before sending the letter.
Here is a straightforward example of a bankruptcy explanation letter:
Sample bankruptcy explanation letter
1256 Richie Drive
San Jose, CA 95128
May 03, 2019
ABC Mortgage Company
1712 Mortgage Avenue
Oakland, CA 94602
RE: Bankruptcy Explanation Letter
Dear Mr. Whitman:
I am writing to explain the circumstances of my [Chapter 7 or Chapter 13] bankruptcy filing from 2017. At the time, my wife had just been diagnosed with kidney cancer. She had been laid off from work five months previously, which meant that our financial situation was already precarious.
Mine was the only income in the household. I was just barely keeping up with the usual bills after the loss of my wife’s income. When she became ill, our medical expenses skyrocketed. Her need for surgery and ongoing medication were critical, but our medical insurance was not sufficient to cover all of the expenses.
My wife’s surgery was successful, but a long recovery period was required. I did the best that I could to pay as many bills as possible. However, it soon became clear that I would be unable to cope. This led to our bankruptcy filing in 2017.
Things have improved since then. I have received annual raises, and my wife has fully recovered from cancer and has been able to go back to work part time. Our credit history since the bankruptcy is relatively limited, but all of our bill payments since the bankruptcy discharge have been on time.
Thank you for your consideration of my mortgage application. You may reach me at email@example.com or 555-123-4567 at any time if you have questions.
Very truly yours,
List of enclosures (if any)
NOTE: Your letter may have more of an impact if you can provide copies of documentation concerning a medical diagnosis or job loss as well as your efforts to timely pay your bills and communicate with creditors.