Getting a Mortgage After Bankruptcy: The Letter That May Make the Difference

Since filing for bankruptcy protection may shave more than 200 points off your credit score (more if your house was foreclosed on!), it stands to reason that you may not be the picture of a good risk when applying for a mortgage. However, that doesn’t mean you can’t get a loan approved; a good letter of explanation about why you filed for bankruptcy can an important first step in the process.

Writing a Hardship Letter to Your Prospective Lender

If you have to write a hardship letter explaining to the prospective lender why you filed, don’t panic. You didn’t decide to file for bankruptcy quickly or easily but there were good reasons to pull the trigger. Now you have to explain them in a way that assures the lender that you aren’t planning on doing it again anytime soon.

1. Medical Emergency: If the reason for your bankruptcy is that you or a family member had a major accident or suffered a serious illness that created considerable medical debt, you have to explain what happened.
2. Personal Tragedy: Did you go through a divorce or lose a spouse? These are also reasons for an understandable debt situation. Make sure you outline what happened, how it impacted your inability to pay bills, etc.
3. Job Loss: If you are the main breadwinner of the family, or even if you share the responsibilities with another person, and half or more of your income disappears thanks to unemployment, you aren’t alone. The economic situation in the US over the past few years made it very difficult to find a job, too. However, now that the bankruptcy is behind you, assuming you have a job now, you can explain to a lender how your current employment situation is more indicative of your future ability to pay.

Explain What Truly Happened with Your Financial Situation & The Solution

Now, you are going to have to write a letter that truly explains what happened. A couple of sentences about “irreconcilable differences” or “credit card debt” and especially a “woe is me, I lost my job” story won’t be enough to prove your current credibility to a lender. You need to be specific and be able to show documents proving your story is true.

Don’t forget to explain to the lender about your efforts to pull yourself out of a bad financial situation. If you filed for Chapter 13, for example, and stuck to the payment plan, share that information. If you got a second job so you could pay back more of what you owed, that’s surely a sign of good faith.

Speak to a qualified bankruptcy lawyer like Joel R. Spivack, Esq. Mr. Spivack has been helping people in South Jersey for more than 20 years get back on the road to financial health after bankruptcy. Call him today for a consultation about your personal situation.


The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney/client relationship. If you are seeking legal advice, please contact our law firm directly.

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Attorney Joel R. Spivack is an experienced bankruptcy and residential real estate transactions lawyer in Cherry Hill, New Jersey. Clients come to us for legal services, but what we really provide is peace of mind. For more than 30 years, Attorney Spivack has helped people make wise, informed decisions about bankruptcy filings, debt relief options and residential real estate transactions.
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