How to Write a Letter Explaining Your Bankruptcy, Foreclosure or Credit Snafu
Posted 01-29-2015 at 02:19 PM by SmartMoney
It’s bad enough to go through something like a bankruptcy or a foreclosure, but to have to write about it can take your breath away. Now, you are forced to recall a part of your life you would prefer to forget. Take comfort you are not alone – you are actually in the majority with a credit blemish. Writing about a late VISA payment or a collection with the utility company seems a bit much, but there are reasons for these requests. This is not a lesson in humiliation, although it may feel like it. The lender, and more specifically, the underwriter wants to make sure you understand your financial obligations.
So, where to start? How about the beginning? Explain what was going on and what happened, just how did you get into this mess? (“My husband left and never paid another dime,” “our payment tripled at the same time I lost my job.”) Stick to the facts – don’t include details that don’t apply to the circumstances. But at the same time, understand humans are reading these letters.
Once you have laid out the problem, explain the steps you took to correct the situation. (“I called the company to see if I could make payment arrangements,” “I called the police to report the fraud,” “I paid it off as soon as it was brought to my attention,” “I really did not agree that the charges were correct, and finally, I reluctantly paid the bill.”) And then explain what happened as a result of your efforts. (“The bank threatened to garnish my pay and I had no choice but to seek bankruptcy protection so I could continue to support my family,” “The company refused to accept partial payment and filed the collection/judgment/lien,” “I closed the account,” “I will always have $xxx in savings.”)
And finally, (yes finally), explain why this will never, ever happen again. (“This experience has taught me to only retain one credit card,” “I now have my bill payer program alert me,” “I have learned never to give my Power of Attorney….”) Explain the steps taken to rebuild your credit and how you know you are on the downside of the problem. ("I opened two secured credit cards," "I had to pay a higher rate when I bought a car," "I will still be able to save $200 month after closing.") And close with, if given this opportunity for homeownership, the first obligation paid each month will be my mortgage.
Be prepared to include any supporting documentation. This can include (but not limited to): letters with the creditor, suits you filed with a co-obligator, doctor’s documentation, death/birth certificates, newspaper articles.
Now, if the event was a missed VISA payment or a medical collection, you need not go thru all of these steps and explanations. But the underwriters do want to know what happened and that it is resolved. Whatever the event, sarcasm will not be appreciated and will be a not-so-subtle hint that you’re not really serious about your mortgage. And if you aren’t serious about the mortgage, you won’t be serious about paying it. Be gracious and thank them for considering your mortgage loan application.
SS
NMLS# 500088
So, where to start? How about the beginning? Explain what was going on and what happened, just how did you get into this mess? (“My husband left and never paid another dime,” “our payment tripled at the same time I lost my job.”) Stick to the facts – don’t include details that don’t apply to the circumstances. But at the same time, understand humans are reading these letters.
Once you have laid out the problem, explain the steps you took to correct the situation. (“I called the company to see if I could make payment arrangements,” “I called the police to report the fraud,” “I paid it off as soon as it was brought to my attention,” “I really did not agree that the charges were correct, and finally, I reluctantly paid the bill.”) And then explain what happened as a result of your efforts. (“The bank threatened to garnish my pay and I had no choice but to seek bankruptcy protection so I could continue to support my family,” “The company refused to accept partial payment and filed the collection/judgment/lien,” “I closed the account,” “I will always have $xxx in savings.”)
And finally, (yes finally), explain why this will never, ever happen again. (“This experience has taught me to only retain one credit card,” “I now have my bill payer program alert me,” “I have learned never to give my Power of Attorney….”) Explain the steps taken to rebuild your credit and how you know you are on the downside of the problem. ("I opened two secured credit cards," "I had to pay a higher rate when I bought a car," "I will still be able to save $200 month after closing.") And close with, if given this opportunity for homeownership, the first obligation paid each month will be my mortgage.
Be prepared to include any supporting documentation. This can include (but not limited to): letters with the creditor, suits you filed with a co-obligator, doctor’s documentation, death/birth certificates, newspaper articles.
Now, if the event was a missed VISA payment or a medical collection, you need not go thru all of these steps and explanations. But the underwriters do want to know what happened and that it is resolved. Whatever the event, sarcasm will not be appreciated and will be a not-so-subtle hint that you’re not really serious about your mortgage. And if you aren’t serious about the mortgage, you won’t be serious about paying it. Be gracious and thank them for considering your mortgage loan application.
SS
NMLS# 500088
Total Comments 0
